Corporate governance aims at promoting fairness, transparency and accountability of a company and it is now perceived to be a good strategy that leads to long-term sustenance and enhanced performance of a business. The first paper, “Impact of Corporate Governance and Financial Parameters on Profitability of the BSE 100 Companies”, by Parul Kumar, Neha Kumar, Sunil K Gupta and R K Sharma, studies the effect of corporate governance and various financial variables on the company’s profitability, Return on Net Worth (RONW), and Return on Capital Employed (ROCE). The study was conducted for companies listed in the BSE 100 index of Bombay Stock Exchange (BSE) for the financial year 2014-15. The results of the study show that earnings per share, leverage, net worth, size of the company and share price are more or less the major factors that significantly impact the return and profit-earning capacity of any company. This research found that with better corporate governance practices, firms can achieve greater returns on their capital invested. The results also state that 73% of the companies in the sample abide by all the regulations of the corporate governance. With the revision of corporate governance guidelines aligned with the Companies Act, 2013, specifically in terms of scope of independent directors, whistleblower policy, and many more, other firms are also working towards achieving better scores and thus enhancing financial performance.

The governance of a company devolves into a field which is full of challenges arising primarily on account of separation of ownership and control in companies. To deal with such governance issues various regulations are framed by regulatory agencies of different countries. While board of directors, as central decision-making authority in companies, play a pivotal role in furtherance of corporate governance, the role of independent directors in this respect has become more critical. The effectiveness of this role hinges on, various structural forms, which may pose serious challenges in its execution. Most regulations focused importantly on the role of independent directors in fostering good and responsible corporate governance.

These rules can be powerful instruments of corporate governance and can bring objectivity and independent judgment in decision making. It has, therefore, become important to study different provisions relating to independent directors in India and compare the same with corresponding provisions from another leading jurisdiction, to assess the overall framework of independent directors on a comparative basis. The second paper, “Independent Directors and Corporate Governance: A Comparative Study of Indian and UK Provisions”, by Kamal Kishore, attempts to reduce the research gap. The research paper is a comparative study of provisions relating to independent directors drawn from relevant codes in India and UK and attempts to delineate various commonalities and differences between Indian provisions on corporate governance as contained in Indian Companies Act of 2013 and its corresponding provision in the UK, known as UK Code of Corporate Governance. Board structure constitutes an integral component of corporate governance as it is concerned with the balance of power, affiliations and positions of its members. Board structure is a foundation of an effective board and as such it is a major driver of board performance. There is an ongoing debate on the relative efficacy of the corporate governance systems in the US and UK (typified by dispersed shareholdings and a prominent role for the secondary market trading of shares) and the corporate governance systems in Japan and Germany (typified by more concentrated shareholdings and a prominent role for banks). The last paper, “Effectiveness of Board Structure in India and Germany: A Comparative Study”, by Aratrika Choudhuri, focuses on this topic in the broader context. The paper analyzes the multifarious attributes of board structure which influence board effectiveness, and explores the interplay of firm performance and variations in such board structures. At present, two prevalent board structures exist: a one-tier board, as extant in India, and a two-tier board, as extant in Germany. Yet, scholars have been inconclusive about favoring one model over the other and have traditionally based their arguments on theoretical approaches. This paper aims to assess the effectiveness of the distinct board systems, based on an assessment of the contrasting experiences of these models. The study establishes the proposition that the one-tier and two-tier board models can be seen as alternative organizational approaches to support the role of board of directors in influencing firm performance and corporate governance.

--Pankaj M Madhani
Consulting Editor