Market and the Boardroom: The Indian Experience
Samik K. Chakraborty & Shaswata Datta
Volume 1 Issue 1 (2008)
The rules of the game of investment in the stock markets have more to it than what meets the eye. The real position and scope of powers enjoyed by a shareholder vis-à-vis the management of the company is nowhere strictly defined. However the developed markets have incorporated rules governing the relationship between a shareholder and the management of the company. Thus, a huge gap seems to exist between the required results that have been obtained by incorporation of such rules in Indian scenario and the one envisaged by the framers. In the Anglo Saxon system, the management has only one objective, namely to act in the financial interests of the shareholders. The management comprises of individual directors and the shareholders are not a part of the decision-making process of the company. In India, the problem of corporate governance though is much different from its European and American counterparts. There seems to be an inherent problem regarding the conflict of interests between the dominant and minority shareholder. This is coupled with the different corporate structures that characterize the Indian market. The role of institutional investor and financial institutions in ensuring a balance between the powers of the dominant and the minority shareholder seem to be negligible. Even the statutory provisions leave enough space for manipulation, which are misused mainly by the family businesses. This article aims at analysing this problem faced by the Indian markets and provide a India Specific model so as not only to protect the interest of the minority shareholder but also ensure better exercise of corporate governance by the companies.