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The word ‘corporate governance’ has become a buzzword these days because of two factors. The first is that after the collapse of the Soviet Union and the end of the cold war in 1990, it has become the conventional wisdom all over the world that market dynamics must prevail in economic matters. The concept of government controlling the commanding heights of the economy has been given up. This, in turn, has made the market the most decisive factor in settling economic issues. This has also coincided with the thrust given to globalisation because of the setting up of the WTO and every member of the WTO trying to bring down the tariff barriers. Globalisation involves the movement of four economic parameters namely, physical capital in terms of plant and machinery, financial capital in terms of money invested in capital markets or in FDI, technology, and labour moving across national borders. The pace of movement of financial capital has become greater because of the pervasive impact of information technology and the world having become a global village. When investments take place in emerging markets, the investors want to be sure that not only are the capital markets or enterprises with which they are investing, run competently but they also have good corporate governance. Corporate governance represents the value framework, the ethical framework and the moral framework under which business decisions are taken. In other words, when investments take place across national borders, the investors want to be sure that not only is their capital handled effectively and adds to the creation of wealth, but the business decisions are also taken in a manner which is not illegal or involving moral hazard.
Approximate Word count = 980
Approximate Pages = 3.9
(250 words per page double spaced)
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