When it rains, it certainly pours. We always hear about the joint-venture opportunities that are on the rise in India, but as the country’s GDP grows past $1.3 trillion, so does its corruption scale; the whole Satyam fiasco speaks for itself. As a result, there is a growing corporate governance concern throughout the country, although not much has been done to address the issue.
Earlier this week, Indian billionaire Anil Ambani came forth and denied allegations that India’s top accounting agency was probing the company’s financial affairs after investors wiped $2.6 billion off the value of shares in six of Ambani’s group of companies, which represent the country’s telecom, capital, power, infrastructure, entertainment and health sectors. The conglomerate has a market capitalisation of $81 billion.
Now some are curious to know whether this move might lead to another corporate scandal for India. According to reports, there are speculations that the execs sitting at the top of Reliance Industries companies are engaging in ‘illegal behaviour’, but who are we to judge? It’s best to leave that to the watchdogs.
I wonder whether this is something that would have surprised Adam Smith. After all, the father of capitalism believed joint-stock companies could never succeed because their managers had no incentive to consider the interests of the shareholders. ‘Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company,’ notes The wealth of nations.
When I got up today I had no clue I would be blogging about India. Hopefully, what is going over there may lead to the adoption of tighter governance laws or standards, given that the US plays an integral role in supporting India’s economy.