Corporate Governance: A Comparative Study. Abstract: Due to globalization, the business world is becoming more and more borderless.

The business world of 21st century is becoming increasingly complex, uncertain, and unpredictable and is changing at a speed of mouse click. To survive in such an environment, businesses have to adopt emerging tools, techniques and management practices. One of such emerging trends in management practices is Corporate Governance. Corporate Governance is the set of processes, customs, policies, laws and institutions affecting the way in which a corporation is directed, administered or controlled. Corporate Governance also includes relationship among many players involved (the stakeholders) and the goals for which the corporation is governed. The principle players are shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. Key elements of good corporate governance principles include honesty, trust, and integrity, openness, performance orientation, responsibility and accountability, mutual respect and commitment to the organization. Corporate Governance centres around the issues and problems arising out of the separation between ownership and control of capital such as rights of shareholders, equitable treatment to all shareholders including minorities, foreigners and other stakeholders, disclosure and transparency and the responsibilities of board of directors. This paper includes a comparative study of Corporate Governance guidelines issued by three international organizations viz. the Organization for Economic Cooperation and Development (OECD), the International Corporate Governance Network (ICGN) and the Asia-pacific Economic Co-operation (APEC) which fairly represent the thinking and perceptions of people on several governance issues of corporates and will help to understand the basis differences between the guidelines issued by these three organizations. The paper also includes a comparative study of three widely accepted models of corporate governance viz. Anglo-American model, German model and Japanese model with Indian corporate governance practices. It helps to understand which model is mostly followed by Indian corporates. This paper also helps to understand how the corporates, following corporate governance practices, are recognized and awarded by the society and how the society brings the

corporates, failing to follow corporate governance practices, to the bottom from the top. Introduction: Corporate governance comprises the system and processes which ensure the efficient functioning of the firm in a transparent manner for the benefit of all stakeholders and accountable to them. The focus is on relationship between owners and board in directing and controlling companies as legal entities in perpetuity. The role of corporate governance is to ensure that the directors of a company are subject to their duties, obligations and responsibilities to act in the best interest of their company, to give direction and to remain accountable to their shareholders and other beneficiaries for their actions. As per the Advisory Board of the National Association of Corporate Directors (NACD), New York, Corporate Governance ensures that long-term strategic objectives and plans are established and that the proper management structure (Organization, systems and people) is in place to achieve those objectives, while at the same time making sure that the structure functions to maintain the corporations integrity, reputation and responsibility to its various constituencies. It is a way of life: Corporate governance is a way of life and not a set of rules. A way of life that necessitates taking into account the shareholders interests in every business decision. ` Review literature Sir Adrian Cadbury in his preface to the World Bank publication, Corporate Governance: A framework for Implementation; states that Corporate Governance is holding the balance between economic and social goals and between individuals and community goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interest of individuals, corporations and society. The incentive to corporations is to achieve their corporate aims and to attract investment. The incentive for states is to strengthen their economies and discourage fraud and mismanagement. The Economist Intelligence Unit has carried out a research on Corporate governance - The new strategic imperative. In this study they have concluded that

regulations are only one part of the answer to improved governance. Corporate governance is about how companies are directed and controlled. Designing and implementing corporate governance structures are important, but instilling the right culture is essential. Senior managers need to set the agenda in this area. There is an inherent tension between innovation and conservatism, governance and growth. Transparency about a companys governance policies is critical. As long as investors and shareholders are given clear and accessible information about these policies, the market can be allowed to do the rest, assigning an appropriate risk premium to companies that have too few independent directors or an overly aggressive compensation policy, or cutting the costs of capital for companies that adhere to conservative accounting policies. Too few companies are genuinely transparent, however, and this is an area where most organizations can and should do much more. According to Raja J Chelliah, the official economic doctrine in India has not been modified to take account of the serious problems of governance that have arisen over the years in our country. It is felt that the deplorable weaknesses in the system of governance in our country can only be remedied through a movement of moral regeneration backed by sufficient pressure by an enlightened public. Institutional and structural changes are called for in addition to moral exhortation. Research Methodology: Research Problem: Corporate Governance needs to be studied separately for two main reasons. The first reason is that in the past there have been many scams, scandals and flagrant violations under the veil of corporate impenetrability. Question of what is right, proper and just in the decision and actions have been raised in the governance of organizations. The second reason is that with more awakened shareholders, and almost predatory journalistic fervor the demands for adhering to good and ethical Corporate Governance practices are likely to increase exponentially. Objectives: 1) To compare corporate governance guidelines given by the OECD with those of other international organizations. 2) To compare Indian corporate governance practices with the practices followed by other nations.

3) To compare Infosys and Satyam on the basis of corporate governance. Type of Data: The research is based on secondary data. Sources: Sources of secondary data include 1) Reference books 2) Internet Period: The research was conducted from 15th July 2010 to 15th September 2010 Data Analysis: I) To compare corporate governance guidelines given by the OECD with those of other international organizationsMany of the international organizations have issued guidelines on corporate governance. A comparative analysis of the guidelines will help to understand the basic differences among those guidelines. Below an attempt is made to analyze comparatively the corporate governance guidelines issued by the Organization for Economic Co-operation and Development (OECD), the International Corporate Governance Network (ICGN) and the Asia-Pacific Economic Co-operation (APEC). Table 1: Corporate governance guidelines given by the OECD, the ICGN and the APEC
Sr. No Key parameters Organization Economic and for Co-operation Development International Corporate Governance Network global principles a) Major organizational changes require their prior approval. b) They have the opportunity to exercise their voting rights. c) Right to have timely disclosure of (ICGN) governance Asia-Pacific Economic operation principles a) Establishment of rights and responsibilities of all shareholders. Co(APEC)

(OECD) guidelines 1. Rights of shareholders a) Their rights to attend and participate in AGMs, to elect Board members, to receive dividends and to avail relevant, timely, regular and accurate information b) Rights to transfer shares

c) To know capital structures and arrangements that confers on some members, disproportionate controlling rights. d) Corporate control mechanism should function efficiently and transparently. e) Transparent transactions; accountable 2. Equitable treatment of shareholders management. a) All shareholders including minority and foreign shareholders receive equitable treatment b) Effective redressal for rights violation. c) Prohibition of insidertrading and self-trading. d) Directors to avoid decisions concerning their 3. Role of stakeholders own interests. a) Recognition of their rights as established by law. b) Encourage their active co-operation in creating sustainable enterprises. c) Permit performance enhancing mechanisms. d) Access to relevant 4. Disclosure and transparency information. a) Accurate and timely disclosure on company objectives. b) Major share ownership and voting rights. c) Financial and operating

the result of resolutions. d) Adherence to oneshare, one-vote standard.

a) one-share, one-vote. b) Protection of the rights of minority and foreign shareholders.

a) Equitable treatment to all shareholders.

a) Directors should build good and productive relationship with stakeholders. b) Directors are responsible for providing accountability to stakeholders a) Timely and full disclosure of all information. b) Disclosure of shareholding and the status of voting rights.

a) Establishment of effective and enforceable accountability standards.

a)Timely and accurate disclosure of financial and non-financial information with regard to company performance.

results. d) Directors and key executives and their remuneration. e) Significant foreseeable risk factors f) Governance structure and practices g) Material issues regarding employees and 5. Responsibilities of Board of Directors other stakeholders. a) Specify key responsibilities of the Board b) Overseeing the process of disclosure and communication c) Monitoring the effectiveness of governance practices and change them, if necessary.

c) Disclosure of Directors compensation policies. d) Annual audits by external statutory auditors.

a) Judgment of Directors independent of management operation. b) Establishment and nomination of committees for audit, compensation and outside directors.

a) Formation of Board of Directors and deciding their remuneration.

Source: 1) Corporate Governance Principles, Policies and Practices By A.C. Fernando Page No. - 19 2) OECD, ICGN, APEC websites. The table indicates following facts: 1) Rights of shareholders: The OECD has given detail guidelines about the rights of shareholders. These guidelines cover the rights to attend and participate in AGMs to elect board members, to receive dividend and relevant, regular, timely and true information about transactions and functioning of management, controlling rights etc. The OECD stresses on transparency in functioning of management. Global governance principles given by the ICGN are in line with the OECDs guidelines. These include opportunity to exercise voting rights, right to receive timely information about the resolutions etc. The ICGN makes it

clear to have prior approval of shareholders before undertaking any major organizational change. It specifies to adhere to one-share one-vote standard. The APEC just mentions establishment of rights and responsibilities of all shareholders. No specific rights of shareholders are mentioned by the APEC. 2) Equitable treatment of shareholders: All the three international organizations specify to give equitable treatment to all shareholders. The OECD makes it clear that all shareholders including minority and foreign shareholders should receive equitable treatment. The OECD stresses on effective redressal for rights violations. It also specifies prohibition of insider- trading and self-trading. The OECD specifies that directors must avoid decisions concerning their own interests. Similar to the OECD, the ICGN also stress on providing equitable treatment to and protecting rights of shareholders. It specifically mentions minority and foreign shareholders. The ICGN specifies that irrespective of the status of shareholders i.e. whether he is a minority shareholder or foreign shareholder or any other type of shareholder, each shareholder should have one vote for one share held by him. In contrast with the OECD and the ICGN guidelines, the APEC specifies equitable treatment of all shareholders. Minority and foreign shareholders are covered by the word all and hence are not separately mentioned. 3) Role of stakeholders: The guidelines prescribed by all the three organizations differ in respect of role of directors in respect of stakeholders. The OECD gives more stress on the rights of stakeholders whereas the ICGN and the APEC explain the role of directors in respect of stakeholders. The OECD specifies that the rights of stakeholders as established by law should be recognized. It also suggests encouraging the active cooperation of stakeholders in order to create sustainable enterprise. It also specifies the right of stakeholders to have access to relevant information. The ICGN is of the view that the board should be held accountable to shareholders and responsible for managing successful and productive

relationships with the corporations stakeholders. The ICGN concurs with the OECD principle that active cooperation between corporations and stakeholders is essential in creating wealth, employment and financially sound enterprises over time. The APEC suggests establishing effective and enforceable accountability standards for stakeholders. 4) Disclosure and Transparency: All the three international organizations specify timely, accurate, full and transparent disclosure of information. The OECD specifies that following information must be accurately and timely disclosed a) Company objectives. b) Major share ownership and voting rights. c) Financial and operating results. d) Directors and key executives and their remuneration. e) Risk factors associated with corporation. f) Governance structure and practices g) Issues related to employees and other stakeholders. The ICGN also specifies timely and full disclosure of information like information about shareholding, status of voting rights, directors compensation policies etc. The ICGN advocates annual audits of corporations by independent, outside auditors in order to enhance transparency in the disclosure of information. The APEC advocates timely and accurate disclosure of financial as well as non-financial information related to companys performance. 5) Responsibilities of Board of Directors: Key responsibilities of Board of Directors as specified by the OECD include overseeing the process of disclosure and communication of information; monitoring the effectiveness of governance practices and changing them if required etc. The ICGN agrees with the OECDs enumeration of board duties and responsibilities. It endorses the assertion that the board should be able to exercise objective judgment on corporate affairs independent, in particular, from management. To further strengthen the professionalism of boards, the

ICGN endorses that the board members should consider establishing committees containing a sufficient number of independent non-executive board members in area like audit, nomination and executive remuneration. The ICGN advocates that audit, remuneration and nomination committees should be composed wholly or predominantly of independent non-executives. The responsibilities of Board of Directors as suggested by the APEC include formation of Board of Directors and deciding their remuneration. II) To compare Indian corporate governance practices with the practices followed by other nationsCorporate governance systems vary around the world. The three most commonly used models of corporate governance as suggested by the scholars include the Anglo American model, the German model and the Japanese model. Here an attempt is made to compare Indian corporate governance practices with the practices suggested by the Anglo American model, the German model and the Japanese model to find out which model is followed by Indian corporate. Table 2: Models of corporate governance and their comparison with Indian corporate governance practicesSr. No Features Anglo-American Corporate Governance 1. 2. Corporative objectives Shareholding Model Shareholder value Diffused institutional investors, significant block holders. Long-term corporate value Banks, promoter families, other corporates. German Corporate Governance Model Japanese Corporate Governance Model Long-term corporate value Financial, nonfinancial corporates. Indian Corporate Governance Practices Shareholder value Directors and relatives, other corporates, foreign investors, Govt.term lending institutions, 3. 4. Governance focus Decision making Capital market. Outside stakeholders Corporate body. Within the network of stakeholders Business network. Within the network foreign investors. Maximize surplus. Management, outside

excluded.

including employees, local community.

includes business associates and banks as stakeholders.

stakeholders excluded.

5. 6. 7.

Control of corporates Orientation Long-term investment in

Separated from ownership. Short-term gains. Physical capital, R&D, human capital.

Linked with ownership. Long-term gains. Plant and equipment, employee training. Less important, due to close ties with banks.

Linked with ownership. Long-term gains. R&D, employee training.

Linked with ownership. Short-term gains. Physical capital.

8.

Capital market (Primary)

Liquid.

Less important, because of close ties with banks. Not important, hostile takeovers rare. High, important in difficult times. Business network; Main bank; Government; Institutional shareholders; Individual shareholders and Employees. Executive and non-executive directors (representing outside finance institutions). To promote long-term

Less important due to institutional funding. Not important, hostile takeovers rare. Low.

9.

Capital market (Secondary)

Important, frequent hostile takeovers possible. Low.

Not important, hostile takeovers rare. High, important in difficult times.

10.

Investor commitment

11.

Major investors

Institutional shareholders; Individual shareholders; Business network; Employees; Government and banks.

Banks; Business network; Employees; Government; Individual shareholders and Institutional shareholders. Two-tier boards, upper tiersupervisory board, lower tiermanagement board.

Directors and relatives Other corporates; Foreign Investors; Govt. term lending institution; Public shareholding; and Institutional investors (UTI). Executive and non-executive directors.

12.

Board composition

Executive and non-executive directors.

13.

Goal of the board

To promote shareholder

To promote longterm organisational

Short-term gains.

wealth. 14. 15. Executive compensation Dividend High. High.

health. Moderate. Low.

organisational health. Low. Low. Moderate, subject to govt. approval. Low, uncertain.

Source: 1) Corporate Governance Principles, Policies and Practices By A.C. Fernando Page No. - 58 The table reveals the following facts: 1) Corporate objective: In case of Anglo-American model, the corporate objective is creating shareholder value whereas in case of both German and Japanese models, the corporate objective is creating long-term corporate value. Similar to AngloAmerican model, in India, the corporative objective is creating shareholder value. 2) Shareholding: In case of Anglo-American corporates, institutional investors are the major shareholders holding significant blocks of shares. In German corporates, major shareholders are banks, promoters families and other corporates whereas in Japanese corporates, financial and non-financial corporates are the principle shareholders. In India, a mixture of practices is followed. Like Anglo-American model, Govt.-term lending institutions are the shareholders. Like German model, Directors and their relatives are the shareholders and like Japanese model, other corporates are the shareholders. Foreign shareholders can also invest in Indian corporates. 3) Governance focus: In Anglo-American model, the governance focus is on capital market, whereas in case of German model, it is on corporate body and in case of Japanese model, it is on business network. But, in India, Governance focus is on maximizing surplus which is different from all the three models. 4) Decision making: In Anglo-American model, the management is responsible for decision making and outside stakeholders are excluded. But, in case of German & Japanese model, outside stakeholders like local community, banks etc. are

allowed to participate in decision making. Indian corporates follow the practice of Anglo-American model. In India, management is responsible for decision making and outside stakeholders are excluded. 5) Control of corporates: Control of corporates is separated from ownership in case of AngloAmerican model whereas it is linked with ownership in both German and Japanese model. Indian corporates too, link control of corporates with ownership similar to German and Japanese model. 6) Orientation: In Anglo-American model, corporates are oriented towards short-term gains whereas in German and Japanese model, corporates are oriented towards long-term gains. In India, like Anglo-American model, corporates are oriented towards short-term gains. 7) Long-term investment: Anglo-American corporates make long-term investments in physical capital, R&D and human capital. German and Japanese models are somewhat similar to Anglo-American model. German corporates make long-term invests in physical assets like plant & equipment; employee training etc. whereas Japanese corporates make long term investments in R&D and employee training. Traditionally, Indian corporates were investing long term funds mostly in physical capital. There was no or very small investment in R&D, employee training and human capital. But now the trend is changing. Indian corporates are shifting towards German and Japanese model and are investing in R&D, employee training and human capital. 8) Primary capital market: For Anglo-American corporates, primary capital market is very important as those corporates are mostly dependant on it for funding. In case of both German and Japanese corporates, primary capital market is less important due to close ties of those corporates with banks. Traditionally in case of Indian corporates, primary capital market was less important due to institutional funding. But now the trend is changing. Similar to AngloAmerican corporates, now Indian corporates also depend on primary capital market for funds. 9) Secondary capital market:

Like primary capital market, secondary capital market is very important in case of Anglo-American corporates as capital market is the major source of funds for corporates. Hence frequent hostile takeovers are possible in case on Anglo-American corporates. But this is not the case with German and Japanese corporates. In case of German and Japanese corporates, secondary capital market is not important. Hence hostile takeovers are rare in case of these corporates. Traditionally, in case of Indian corporates, secondary capital market was not important and hence hostile takeovers were also rare. But now the trend is changing. Similar to Anglo-American corporates, secondary capital market is important for Indian corporates. 10) Investor commitment: Investors commitment is low in case of Anglo-American corporates. The securities of these companies are very liquid indicating that investors remain with corporates only in good times and liquidate their investments in difficult times. In contrast with this, investors commitment is high and is important in difficult times in case of German and Japanese corporates. Investors in Indian corporates are also less committed as that of investors in Anglo-American corporates. 11) Major investors: Major investors in all the three models are almost similar. These include institutional shareholders, individual shareholders, business network, employees, Government and banks. The only difference is that the share of these investors under each model is different. E.g. in Anglo-American corporates, the major investors are the institutional shareholders and then individual shareholders; other investors include business network, employees, Government and banks. In case of German corporates the major investors are the banks and then business network; employees, Government institutional shareholders and individual shareholders represent small investment. In case of Japanese corporates, the major investors are business network and then banks; other investors include Government, employees. institutional shareholders, individual shareholders and

In Indian corporates, directors and their relatives, other corporates, foreign investors are having the major share. Other investors include government, term lending institutions, public and institutional investors. 12) Board composition: In Anglo-American and Japanese corporates, the board is composed of executive and non-executive directors whereas German corporates have twotier board structure with upper tier- supervisory board and lower tiermanagement board. Indian corporates follow same practices as those of Anglo-American and Japanese corporates having executive and non-executive directors on the board. 13) Goal of the Board: Consistent with the corporate objective, goal of the board is to promote shareholder wealth in case of Anglo-American model. Similarly goal of the board in case of both German and Japanese models is to promote long-term organisational health. Traditionally, in case of Indian corporates, the board was more concerned about short-term gains. But now the trend is changing. Similar to Anglo-American corporates, the board of Indian corporates is focusing on the goal of promoting shareholder wealth. 14) Executive compensation: Executives working with Anglo-American corporates, receive high compensation, whereas it is moderate in case of German model and low in case of Japanese model. Indian corporates follow the practices of German model, giving moderate compensation to executives but subjected to Government approval. 15) Dividend: Anglo-American corporates declare high dividends to attract investors in capital market. It is necessary for these corporates as capital market is the major source of funds for these corporates. However, German and Japanese corporates declare low dividends as they get funds mostly from banks. Traditionally Indian corporates too, were declaring low dividends because of institutional funding. But, now a days, as the Indian corporates are depending more and more on capital markets, they are also forced to declare high dividends.

III) To compare Infosys and Satyam on the basis of corporate governanceThe last few years have witnessed some major scandals and corporate collapses across the globe. In India, the recent example is of Satyam which was one of the top IT companies in India. Because of such events, society is becoming more and more conscious about corporate governance practices implemented by companies. People are more concerned about how companies are being managed. Companies that follow corporate governance practices are recognized and rewarded by the society. On the other hand, companies that fail to follow corporate governance practices are brought to the bottom from the top by the society. A comparison of Infosys and Satyam on the basis of corporate governance clearly supports the above statement. Corporate governance at Infosys: Infosys is very strong in the area of corporate governance. Corporate governance practices were introduced at Infosys nearly a decade ago. Infosys' greatest contribution is to bring about a sense of decency, transparency and public commitment to business practices in India. In one instance, when other software firms were grumbling about a government plan to phase out tax holidays for software exports, Infosys shocked its peers by announcing it was ready to pay the tax. The Infosys annual report is a shining example of corporate transparency. The firm has been a trend-setter in disclosures and a leader in shareholder service. In 1999, Infosys became the first India-registered company to be listed on the National Association of Securities Dealers' Automated Quotations (NASDAQ). And in June 2009, NASDAQ paid a tribute to the Bangalore firm's transparent tradition by selecting two companies - USA Networks and Infosys as the best value reporters. Multinational companies have started studying Infosys as a role model for disclosure. The company gives details about everything related to it under the sun in seven international languages, making it most investor friendly. NASDAQ has pointed out that the company provides segmented information to not only the shareholders and other stakeholders but also customers, clients, suppliers, media and analysts. Infosys is that rare company in which many Indian investors blindly put their life savings, knowing that it will not only be safe but will also fetch them great returns. Everything they need to know about the

company is available in its balance sheets or in the transcripts of media interviews with its top management. Corporate governance philosophy of Infosys: Corporate governance philosophy of Infosys is based on the following principles: 1) Satisfy the sprit of the law and not just the letter of the law. Corporate governance standards should go beyond the law. 2) Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose. 3) Make a clear distinction between personal conveniences and corporate resources. 4) Communicate externally, in a truthful manner, about how the company is run internally. 5) Comply with laws in all the countries in which the company operates. 6) Have a simple and transparent corporate structure driven solely by business needs. 7) Management is the trustee of the shareholders capital and not the owner. Awards to Infosys for excellence in Corporate governance: Infosys has been recognized and awarded many times for its excellence in corporate governance. Below is a list of these awards: 2010: Infosys, the best managed company in India: FinanceAsia poll Infosys was voted the best company in management, corporate governance, investor relations, and corporate social responsibility (India) in a FinanceAsia magazine survey More than 200 investors and analysts voted in FinanceAsias annual survey of Asia's best managed companies. 2009: Infosys' corporate governance provides highest level of assurance: ICRA Infosys has received the highest rating on corporate governance by ICRA, a leading credit rating agency in India. Infosyss corporate governance practices have been rated at CGR1 in ICRAs Corporate Governance Rating (CGR) scale of CGR1 to CGR6. According to ICRA, Infosys adopts and follows practices, conventions and codes that provide its financial stakeholders the highest level of assurance

on the quality of corporate governance. In its report, ICRA states that "the highest CGR rating continues to reflect Infosys transparent and disbursed ownership structure; sound Board practices; reasonable sized, cohesive and articulate Board; its robust executive management structure with visible depth in management; the considerable thrust on internal systems and control; its current high quality of disclosures, sound financial position; and consistent high profitability." 2008: 1) The Asset magazine acclaims Infosys' Corporate Governance Infosys has been named as the best company in India in Corporate Governance in The Asset Magazine's annual Corporate Governance Index 2008. 2) Infosys ranked No. 14 among the most respected companies Infosys has been ranked as the 14th most respected company in the world by Reputation Institute's Global Pulse 2008. The Institute's Global Pulse Model assesses the reputation of the world's largest companies across dimensions of workplace, citizenship, governance, products / services, innovation, leadership and performance. Infosys was ranked in the Top 5 in four categories: Fifth in citizenship, fourth in governance, fourth in products / services and fifth in leadership. Reputation Institute, a private advisory firm that specializes in corporate reputation management, evaluated 600 companies by conducting over 60,000 online interviews with consumers in 27 countries for the Global Pulse 2008 study. According to Reputation Institute, Infosys' ranking at No. 14 in the Global Pulse 2008 recognizes Infosys' growing role among the world's business elite. In 2007, Infosys was ranked at No. 120. 2007: The Reputation Institute: Infosys, a globally respected company The Reputation Institute rated Infosys among the 200 most globally respected companies. Infosys was ranked at No. 120. The rankings were based on parameters of Product or Services, Innovation, Workplace, Governance, Citizenship, Leadership and Performance. 2005:

Infosys tops the regional rankings for best Corporate Governance in Asiamoney's Corporate Governance Poll 2002: 1) The Institute of Company Secretaries of India National Award for Excellence in Corporate Governance by the Ministry of Law, Justice and Company Affairs, Department of Company Affairs, Government of India 2) Golden Peacock Award for Excellence in Corporate Governance in the Global Category by the World Council for Corporate Governance, London 3) Ranked No.1 in CG Watch 2002, a corporate governance survey of emerging market companies by CLSA Emerging Markets 2001: Infosys has been ranked No.2 in corporate governance in a survey of 495 emerging market companies by CLSA Emerging Markets 2000: 1) Infosys was awarded the "National Award for Excellence in Corporate Governance" by a panel of judges chaired by Former Chief Justice of India, Shri P.N. Bhagwati. This award is conferred by the Government of India and sponsored by Unit Trust of India 2) Won the Corporate Award for excellence in Corporate Governance, Bombay Stock Exchange 1999: National Award for Excellence in Corporate Governance - Sponsored by the Unit Trust of India Corporate governance at Satyam: Introduction: Satyam Computer Services Limited was founded in 1987 by Mr. B Ramalinga Raju. The company offers consulting and information technology services spanning various sectors, including engineering and product development, supply chain management, client relationship management, business process management and business intelligence. The company listed on the New York stock exchange, national stock exchange, and the Mumbai stock exchange.

Satyam Scandal: The Satyam Computer Services scandal was publicly announced on 7 January 2009, when Chairman Ramalinga Raju confessed that Satyam's accounts had been falsified. In addition to other controversies involving Satyam, on January 7, 2009, Chairman Raju resigned after publicly announcing his involvement in an accounting fraud. Raju confessed that Satyam's balance sheet of September 30, 2008, contained the following irregularies: 1) Inflated figures for cash and bank balances of Rs.5040crore (US$1.07 billion) as against Rs.5361crore (US$ 1.14 billion) reflected in the books. 2) An accrued interest of Rs. 376crore (US$80.09million) which was nonexistent. 3) An understated liability of Rs. 1230crore (US$ 261.99 million) on account of funds was arranged by himself. 4) An overstated debtors position of Rs.490crore (US$104.37million) as against Rs.2651crore (US$564.66million) in the books. Effects of scandal on Satyam: Before scandal, Satyam was considered as one of the four pillars of the success story of the Indian software industry in the global economy. Along with Infosys, Tata Consultancy Services and Wipro, Satyam was known for its coveted Fortune 500 clients, innovative software projects, capacity to train thousands of software engineers and best-in-class certification of software engineering practices. It took more than 20 years to create such an image in the society. After scandal this image of Satyam was converted into Asatyam only in one day. The effects of scandal on Satyam are listed below: 1) Immediately following the news, Merrill Lynch now a part of Bank of America and State Farm Insurance terminated its engagement with the company. 2) Credit Suisse suspended its coverage of Satyam. 3) It was also reported that Satyam's auditing firm PricewaterhouseCoopers will be scrutinized for complicity in this scandal. SEBI, the stock market regulator, also said that, if found guilty, its license to work in India may be revoked.

4) Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, which was stripped from them in the aftermath of the scandal. 5) The New York Stock Exchange has halted trading in Satyam stock as of 7 January 2009. 6) India's National Stock Exchange has announced that it will remove Satyam from its S&P CNX Nifty 50-share index on 12 January. 7) Satyam will also be excluded from the CNX 100 index, CNX 500 index and the CNX IT index. Reliance Capital Ltd will replace Satyam in the main index. 8) Satyam has lost more than 10000 Crore rupee in a single day trading. 9) $8 Crore changed hands at BSE and 33 Crore changed hands at NSE. 10) Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008. In New York Stock Exchange Satyam shares peaked in 2008 at US$ 29.10; by March 2009 they were trading around US$1.80. 11) Satyams largest shareholder, Aberdeen AMC, dumped the tainted software entitys shares. 12) Swiss Finance Corp Mauritius Ltd: Sold 7786759 shares at Rs.74.61. 13) Aberdeen International India Opportunities Mauritius Ltd sold 9830811 shares of the company at Rs.43.41 14) ) Aberdeen Asset Managers Ltd Aberdeen Global Asia Pacific fund: Sold 4179064 shares at Rs.43.41. 15) The founder of Satyam was arrested two days after he admitted to falsifying the firm's accounts. Ramalinga Raju is charged with several offences, including criminal conspiracy, breach of trust and forgery. Satyam at Stock Exchange: The position of Satyam before and after scandal on the BSE is clearly indicated by the following graph:

Movem entsof pricesof S atyamat B E S

600 500 400 300 200 100 0

BSE. The price was Rs. 389.2 in Jan2008, which was increased upto Rs. 523.75 during May2008. During the month of Jan2009, in which scandal was publicly announced, the price was decreased to Rs.54.05, which came down to Rs.38.35 during March2009. At present, though the position is improving, it is very difficult for Satyam to regain the earlier position in the market. Findings: Data analysis indicates following facts: 1) A comparative study of Corporate Governance guidelines of the OECD, the ICGN and the APEC indicates that there are no vast differences among the guidelines given by all the three international organizations. The guidelines are more or less similar in respect of parameters like rights of shareholders, equitable treatment of shareholders and disclosure and transparency. Some differences exist in guidelines related to parameters like role of stakeholders and responsibilities of Board of Directors. The OECDs guidelines are more detail and specific. On the other hand, the APECs guidelines are short and general. The ICGNs guidelines lie in between the OECDs guidelines and the APECs guidelines as they are specific as the OECDs guidelines but are short like the APECs guidelines. 2) Comparison of Indian Corporate Governance practices with commonly used Corporate Governance models worldwide, viz. Anglo-American model, German model and Japanese model clearly indicates that in India, a mixture of Corporate Governance practices is followed. Some of the Indian Corporate Governance practices are similar to that of Anglo-American model, some are

c i r P e s o l C

The graph clearly indicates the effect of scandal on Satyams share prices in

similar to that of German model and some are similar to that of Japanese model. 3) Comparison of Infosys and Satyam on the basis of corporate governance indicates how the companies are awarded as well as penalized on the basis of corporate governance. Infosys is strong at all key principles of good corporate governance including honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect and commitment to the organization. This is the reason why it has been awarded and recognized from time to time by the society. Infosys is a role model of Corporate Governance. Infosys is that rare company in which many Indian as well as foreign investors blindly put their life savings, knowing that it will be safe and bring more returns. Infosys is contributing for making good impression of Indian companies at the international level. On the other hand, Satyam has failed to stick to any of the principles of good Corporate Governance. From the above analysis, it can be observed that the Corporate Governance practices and principles are not followed by the Satyam group. This is the reason why it has brought to the bottom from the top by the society. Satyam had lost trust of investors for itself and other Indian companies also at international level. Conclusion: The corporate governance framework should protect shareholders rights. The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. The corporate governance framework should recognize the rights of stakeholders as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises. The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the boards accountability to the company and the shareholders.

Traditionally a mixture of Corporate Governance practices was followed in India. But the current trends are indicating that Indian corporates are shifting from German and Japanese model to Anglo-American model of corporate Governance. For long-term survival, companies must follow Infosyss path of Corporate Governance and must remain far away from Satyams path. References: 1) C.V.Baxi, Corporate Governance - Critical issues, 1st edition, Excel Books Publications, New Delhi, 2007 2) S.K.Bhatia, Business Ethics and Corporate Governance - Concepts, Issues, Practices and Dilemmas in Shaping Ethical Culture for Competitive Advantage of Organizations, Deep and Deep Publications Pvt. Ltd. New Delhi, 2004 3) Ravi Kishore, Taxmanns Financial Management - Comprehensive Text Book, 6th edition, Taxmann Allied services (P) LTD., New Delhi, 2008. 4) Prasanna Chandra, Financial Management - Theory and Practice, 7th edition, Tata McGraw-Hill Publishing Co. Ltd., New Delhi, 2008 5) Surender Kumar, corporate Governance A question of Ethics, Galgotia Publishing Company, New Delhi, 2000. 6) H.R.Machiraju, Corporate governance, 1st edition, Himalaya publishing House, Mumbai, 2004 7) A.C.Fernando, Corporate Governance Principles, Policies and Practices, 1st edition, Pearson Publication India, New Delhi. 8) www.oecd.org 9) www.bestpractices.cz 10) www.icgn.org 11) www.ecgi.org 12) www.wikipedia.com 13) www.bseindia.com 14) www.infosys.com/about/awards/Pages/aa-awards.aspx