1. Comments on “Corporate Governance and Firm Performance: Empirical Evidence from India” by R. Madhumathi, M. Ranganatham, and R. Kannan Shyam Sunder Conference on Shifting Capital Markets and Corporate Performance The Millstein Center for Corporate Governance and Performance, Yale School of Management November 7-8, 2008

2. Sunder: Comments on Corp. Governance in India 2 An Overview It is encouraging to see research on corporate governance in India: exploring the alternatives to Kokilaben model However, need care in design and interpretation of empirical studies on statistical correlations What, Why and How of good governance? What should be empirically observable consequences of good governance? Should we expect small shareholders to earn higher returns from investing in well-governed firms? In addition to financial capital markets, there are labor and physical capital markets to consider Anglo-Saxon governance is no different in its economic fundamentals A brief glance at history

3. Sunder: Comments on Corp. Governance in India 3 What, Why and How of Good Governance? –Good governance: balance or match between the culture (mutual expectations) and self-interest of the participants –Why Good Governance? To make all participants better off –Elements of Good Governance: balance among regulation, market forces, and social norms

4. Sunder: Comments on Corp. Governance in India 4 Interpreting Correlations Suppose a promoter governs the company well (i.e., does not steal and/or utilizes resources of the firm efficiently to generate more wealth) Who should we expect will get this extra wealth? The promoter (managers) or small shareholder? What would be the capital market consequences? Which firms are more likely to allow independents to serve on the board or chair the company?

5. Sunder: Comments on Corp. Governance in India 55/6/2015Sunder, Good Governance5 An Old Problem Governance problems are as old as human civilization The greatest corporation in the history of the world had serious governance problems throughout 258 years of its existence: Trial of Warren Hastings

6. Sunder: Comments on Corp. Governance in India 65/6/2015Sunder, Good Governance6 Westminster Hall Trial of Warren Hastings London: Published for the Proprietor by J. Mead, 10, Gough Square, Fleet Street

7. Sunder: Comments on Corp. Governance in India 75/6/2015Sunder, Good Governance7 Warren Hastings Controversy - Fox, North and Burke Assailing 'The Savior of India'

8. Sunder: Comments on Corp. Governance in India 85/6/2015Pitt, Hastings and Thurlow as State Jugglers

9. Sunder: Comments on Corp. Governance in India 95/6/2015Sunder, Good Governance9 And a Modern Problem “Corporate governance is another area where practices may change as the Ambani brothers attempt to bury the hatchet. While the dispute raged during the past few months, allegations arose of investments being made without board consultation, and of share allotments at discounted values. The Ambani dispute and its resolution also demonstrate the need for family-owned businesses to set up effective processes for communication and conflict management. Knowledge Wharton

10. Sunder: Comments on Corp. Governance in India 105/6/2015Sunder, Good Governance10 Mother of All Deals “With the blessings of Srinathji, I have today amicably resolved the issues between my two sons keeping in mind the proud legacy of my husband. I am confident that Mukesh and Anil will uphold the values of their father and work towards protecting and enhancing value of over 3 million shareholders of the Reliance group.... Mukesh will have responsibility for Reliance Industries and IPCL while Anil will have responsibility for Reliance Infocomm, Reliance Energy and Reliance Capital." Kokilaben D. Ambani, June 18, 2005

11. Sunder: Comments on Corp. Governance in India 115/6/2015Sunder, Good Governance11 Perfect Permanent Solution Unlikely Just because we have no easy or permanent solutions, it does not mean we can give up trying to address the governance problem Constant striving and vigilance is the price all of us must pay for the great benefits organizations enable us to reap Democracy does not function well without combination of citizen docility and vigilance Also true of corporate governance; it requires the participants, especially the minority shareholders to exercise intelligent watch for the system to function efficiently

12. Sunder: Comments on Corp. Governance in India 125/6/2015Sunder, Good Governance12

13. Sunder: Comments on Corp. Governance in India 13 Thank You! Shyam.sunder@yale.edu www.som.yale.edu/faculty/sunder