Introduction

Corporate Governance was the most important topic of popular as well as academic debate in the 1980s and the 1990s. In the coming years too, interest in this topic is not likely to wane. The interest in corporate governance is primarily due to two factors: curious happenings in the corporate world and the globally mobile capital flows which are highlighting differences in corporate governance systems, in different parts of the world. In the last two decades, many businesses have collapsed. Scandals such as BCCI, Maxwell Communications and Polly Peck appear to be less important today only because Enron, Arthur Andersen, WorldCom and scores of other businesses have plumbed new depths in fraudulent practices. The Economist (May, 2002) has started dividing various happenings in this field into two periods – pre-Enron and post-Enron!

Many of these businesses had clean audit reports. The stories doing the rounds since the collapse of Enron include one about the make-believe trading hall, built at a cost of half-a-million dollars to simply create an impression of frenzied activity among investors. Unethical consultancy and other business dealings between companies and their auditors have been found and by hindsight it is realized that the issue of conflict of interest was never seriously addressed in them. Some high profile executive have been put behind bars. Excessive pay package for executives has made shareholders and some big corporations considerably poorer.

In the wake of these murky events, committees are busy making recommendations that will ostensibly correct these wrongs. Takeovers in the capital market have put new managerial teams in office in some big companies.