Corporate governance has been studied by researchers from the theoretical as well as practitioners’ perspectives as both these dimensions are complementary in nature. It is necessary to formulate, validate and apply various corporate governance theories to understand the broad mechanism of corporate governance. As various theories and philosophies have provided the foundation for the development of corporate governance systems around the world, it is these theories that is the major focus of this issue.

Against this backdrop, Pankaj M Madhani, the author of the paper, “Diverse Roles of Corporate Board: A Review of Various Corporate Governance Theories”, analyzes the theoretical foundations of corporate governance and identifies various roles of corporate board from that viewpoint. The corporate board (i.e., board of directors) has generally been perceived as the backbone of corporate governance. The board has diverse functions and roles such as control role, strategic role, service or resource provision role and advice and counsel role. There are many theories of corporate governance to explain such diverse roles of corporate boards. Any single corporate governance theory cannot fully explain the complexity and heterogeneity of the board functions in a corporate business. Hence, this research study looks at four main theories, namely, agency theory, stewardship theory, resource dependency theory, and resource-based view theory, to understand board functions. Researchers have started applying multiple theoretical perspectives on the functioning of boards which consider several board tasks so as to capture the richness and variety of boards’ roles and activities.

Moving on to the next paper, “Normative Ethical Theories as Frameworks for Better Corporate Governance: A Practitioner’s Perspective”, its author, Malla Praveen Bhasa, makes an attempt at drawing the attention of ‘ethics’ researchers as well as business practitioners to various ethical theories that complement business actions. As a practitioner, the author feels that among all the normative ethical models, ‘value theory’ offers a potent framework to base one’s business actions in. As value theory framework suggests that value be investigated logically to arrive at a reasonable and acceptable value, it is understood that all stakeholders, including the corporate decision makers, would be well off with the act-consequences. An action is right or wrong based on how the value seeker perceives value and how an individual is affected by it. Corporations should appreciate the value cognitions and value judgments made by their stakeholders to deliver the right value which is construed ethical, irrespective of whether it is right or wrong in act.

In the third paper, “The Relationship Between Corporate Social Responsibility and Financial Performance of Indian Banks”, the authors, Geetika and Akanksha Shukla, explore the type of industry for which relevance of Corporate Social Responsibility (CSR) is under question. The paper attempts to answer the question by determining the impact of CSR on the financial performance of the Indian banks. For this study, a sample of 20 banks consisting of 12 public sector and seven private sector banks is selected for the financial year 2012-13, 2013-14 and 2014-15. It uses regression analysis to determine the impact of CSR expenditure on the financial performance of banks, in terms of Profit after Tax (PAT), Return on Assets (ROA), Return on Equity (ROE) and market capitalization of the banks. The study provides evidence that CSR can help banks in their sustainable development.

In the last paper, “Corporate Governance Practices of Turkey: A Critical Review”, the authors, Metin Toprak and Yuksel Bayraktar, portray the advent of corporate governance in the Turkish economic and financial regulatory and institutional frameworks. The Capital Market Board (CMB) (regulatory authority of corporate governance) law renewed in 2012 reinforced the authority of the CMB over other governmental institutions. CMB law made it mandatory for Bourse Istanbul (BIST) companies to implement corporate governance regulations. NGOs have also contributed to raising awareness about corporate governance in Turkey. The external financing of the companies was heavily based on banks (external finance) as in the continental Europe. Due to the dependence on foreign financing, development of corporate governance in Turkey was relatively delayed when compared to the Anglo-Saxon countries such as the UK and the US. On evaluating the performance of the companies that implemented corporate governance with the non-implementing companies, it is found that the performance indexes of both the sectors do not differ significantly. Hence this research concludes that corporate governance in Turkey is at the stage of initial development and is still treated as a set of procedures and needs time to be internalized.

--Pankaj M Madhani
Consulting Editor