Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. It also involves the structure through which objectives of the company are set, the means of attaining those objectives and monitoring performance are determined.
Corporations pool capital from a large investor base both in the domestic and in the international capital markets. In this context, investment is ultimately an act of faith in the ability of a corporation’s management. When an investor invests money in a corporation, he expects the board and the management to act as trustees and ensure the safety of the capital and also earn a ‘rate of return’ which is higher than the cost of capital. In this regard, investors expect management to act in their best interests at all times and adopt good corporate governance practices. These objectives of investment by the investors may not always be fulfilled when corporations go for mergers and acquisitions (M&A). Healthy corporate governance practices ensure protection to such investors.
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Post Contributed By:
Indra Nath Dey
Indian Institute of Legal Studies
