A new research report by Hong Kong’s Asian Corporate Governance Association finds that a year after the Satyam scandal unfolded in India, many of the conditions that helped facilitate the company’s multi-billion fraud still exist.
To research the report, the ACGA received information from more than a dozen large foreign institutional investors, and major auditors and law firms. The chief complaint, the AP reports, was that “controlling shareholders have too much power, a situation with roots in Indian culture and the nation’s corporate regulations.” Many Indian businesses, the report found, are
rooted in old family empires run by men who are happy to take money from public shareholders but loathe to cede control. As a result, minority shareholders and independent directors often have little real power. That, plus inadequate regulation and lax oversight, means controlling shareholders can often manipulate a public company for their personal profit, critics say.
ACGA belives that one important fix to the problem is to empower institutional investors.
