Robustly equipped regulatory systems can influence and nudge companies towards better behaviour.
The risk with investing in poorly governed companies is clear and significant. Bad corporate governance is an express highway to losses and, sometimes, big failures. Every stakeholder loses out. Yet, awareness and voluntary acceptance of best practices never been forthcoming. The need to regulate corporate governance is clear.
The Kotak committee report has moved the good governance agenda forward by proposing new rules. Among all the recommendations in the report, the regulatory capacity aspect stands out the most. Compared to past reports on governance, the Kotak report has specific recommendations on how to build infrastructure for monitoring and enforcing laws.
It is notable that over the last two decades, India’s listed marketplace has grown many times over in both complexity and size, outmatching the increases in regulatory capacity.
The risk with investing in poorly governed companies is clear and significant.
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Can regulation influence governance behaviour? | Livemint