ISB Holds a Conference on Corporate Governance in Emerging Markets

ISB Holds a Conference on Corporate Governance in Emerging Markets

Sang-Jo Kim, Professor - Hansung University; Director - Korean Professors Association for Democracy, South Korea, spoke on corporate governance reform and shareholder activism in Korea. He explained the structure and functioning of several chaebols or family-owned conglomerates in Korea, particularly focusing on the Samsung Group.

He said that, in Korea there are no domestic investors who are truly independent from these chaebols. Financial affiliates of chaebols outcross companies' assets, and unjust related party transactions directly violate the Free Trade Act. Though the government introduced new regulations after an economic crisis, distrust in enforcement mechanism has proved to be a limitation. Kim also explained the role being played by his NGO - PEC-PSPD in raising issues of minority shareholders' interests.

Sanjay Nayar, CEO - Citigroup, India, held that as privatisation increased, Corporate Governance standards would improve. The way forward would be to facilitate ease of governance, ensure greater collaboration between institutional investors, strengthen individual nominee / directors' role, the institutional role in corporate governance, and allowing foreign pension funds.

Rajnikant Patel, MD & CEO, Bombay Stock Exchange, said that the weighted average of institutional holding in Sensex companies is 28%. This significant holding, he said, required activism, especially in the context of the Indian market. Internationally, such activism on the part of the institutional investor, had increased, and a similar trend is likely to be seen in India as well. He also felt that while the focus on accountability needed to increase, the attitude of the Board going beyond compliance should be encouraged, and a "mechanical approach" towards corporate governance needed to be discouraged.

Third Session

G. N. Bajpai, ex-Chairman LIC, ex-Chairman SEBI, moderated the third session on "Can family businesses and business groups have effective governance? He said that family businesses were challenged to seize opportunities and leverage complementarities. Professionalism could help enhance possibilities of "leapfrogging", and separation of ownership and control defined modern capital markets - a current development in contemporary markets.

V. R. Mehta, Director and Chairman, Audit Committee, Tata Motors, defined corporate governance as representing all systems and processes an organisation has in place to protect the interests of its diverse stakeholders.

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Contributed by -
Ms. Bhuvana Ramalingam,
Director - Communications,
Indian School of Business, Hyderabad.

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