Saturday, January 10, 2009
Satyam and promoter holdings
It is important that if the promoter holding goes belows a thresh-hold in family owned companies, the company management should be entrusted with professionals and not run by the promoters, for the incentive for promoters to increase shareholder value reduces as their holdings reduce, and syphoning money out or investing in other companies of promoters where there is sub-stantial holdings and fraud is the end result. This will be especially true of family owned companies with very low promoter holding in India. Expecting corporate governance to un-earth such fraud might be too much to ask of the board, especially in a country, where corruption in our social setup and mindset is norm than exception.
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True that effective checks should be in built in the system.But we must keep in mind, that evil mindset have been co existing with the bonafide one since inception. There is a need of Proactive approach. Unfortunately Indian minset is just reactive only. In past also we have seen the scams, but our inefficient criminal justice system failed to deliver the justice, in turn encouraging prospective violators to pursue the crime.
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