It is widely felt that the entry of CalPERS will help break the inertia and act as a catalyst to set higher standards of corporate governance. The Indian corporate world will hopefully accept that corporate governance and compliance issues touch key stakeholders both inside and outside the company. Over the past six months, large Indian companies like Mahindra & Mahindra, Reliance Energy and Gujarat Ambuja raised over $.1.5 bn through foreign currency convertible bonds (FCCBs), which were taken up by FIIs. There is no doubt that after US $ 26 billion worth of foreign institutional investments, corporates have to acknowledge the importance of this class of investors.

In a recent study of 50 Indian companies by Standards & Poors, 33 companies were actually classified as badly governed companies. The list included some big names in the private sector. The study was based on three parameters: corporate structure and investor relations, transparency and information disclosures and management structure and processes. After the entry of CalPERS, managements will have to face even more close watch and reporting on their governance standards.

Editor

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