Obviously not all well governed companies do well in the market place. Nor do the badly governed ones always sink. But even the best performers risk stumbling some day if they lack strong and independent boards of directors.

Corporate governance among the large international business enterprises in India is often considered good. The board of Satyam comprised of a bunch of esteemed business leaders. However Satyam was involved in a billion-dollar fraud.

Like in the western companies, International Indian companies with significant overseas business followed the International Governance, Risk and Compliance (GRC) codex and standard quite eagerly. Website jargon, diagrams and multi page glossy GRC descriptions of strenuous efforts in the annual reports showed that they were all in compliance.

But Corporate Governance in India has been driven by industry, however now regulators have reacted in the aftermath of the Satyam crisis. (The Confederation of Indian Industries published a code of corporate governance 10 years ago, with several ‘best practice’ elements from the western world. (see A CODE from the Confederation of Indian Industry).

The accounting manipulations of India’s Satyam Computer Services Ltd, has now resulted in a more rigorous set of Compliance rules and norms with the involvement of the authorities.

The Corporate Affairs ministry of India has announced the following regulations to protect the stakeholders, and small investors that do not have any specific instrument for accountability

• Accountability and transparency norms to further strengthened to prevent Satyam-like scams
• Early warning systems that allows even small investors to detect irregularities
• Specific clauses allowing “articulation of shareholders democracy with protection of the rights of minority stakeholders and responsible self-regulation with disclosures and accountability
• The role of independent directors as part of the Corporate Governance norms will be strengthened and demystified
• Quarterly earnings reports, company surveys and analyst reports to detect irregularities in companies and assess the health of firms.

Authorities in India worked hard to unravel a $1 billion fraud scheme at Satyam Computer Services. It was feared that Satyam’s internal control failures could undermine the comfort level of foreign multinationals. Satyam presumably provided SAS 70 Level II audit reports to its public company customers to assert their financial data was secure and that the financial data was not compromised.

Excerpt from the 1998 DESIRABLE CORPORATE GOVERNANCE, A CODE from the Confederation of Indian Industry)