Previous Chapter Chapter 19: Issues in Corporate Governance in India1

Asish K. Bhattacharyya

In: Good Governance, Democratic Societies and Globalisation

Chapter 19: Issues in Corporate Governance in India1

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Issues in Corporate Governance in India1
Issues in corporate governance in India

The fundamental question of corporate governance is how to assure financiers that they get a return on their financial investment (Shleifer and Vishny 1996). Berle and Means observed that by 1932 ‘entrepreneurial capitalism’ had given way to a system of ‘financial capitalism’ where owners and professional managers who ran the corporations were not the same. According to them, separation of ownership and management also leads to a separation of ownership and control (Berle and Means 1932). This gives rise to the agency problem because the ‘utility’ of professional managers seldom converge with the ‘utility’ of owners. The agency problem perspective or the principal-agent paradigm fits into the view that modern corporations are run by ...

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