Corporate overview

WITH the proliferation of instances of corporate fraud and financial scandals, the need for transparent and responsible corporate governance is at the forefront of public debate. The downturn in the global economy and the consequent financial strains on corporations have forced companies to focus on issues of corporate profligacy, governance, transparency and accountability. K.R. Ramakrishnan’s book Global Corporate Law provides a detailed account of corporate laws in 58 countries. It offers valuable information not only for corporates looking at setting up business in different countries but also for economists and students looking at a comparative cross-country study of corporate regimes. The analysis offered by the author engages with critical questions of corporate governance. The book provides a detailed account of corporate laws in each country which deal with mismanagement, accountability, responsibilities and liabilities of shareholders. For instance, the chapter on India provides details of the processes of corporate debt restructuring, debt recovery and the special audit that can be ordered by the Central government in case of mismanagement of a company. The analysis of laws, however, could have been illustrated with a few recent cases where companies have experienced massive financial strains, even leading to closure, owing to mismanagement and corporate profligacy. The Kingfisher Airlines debacle is an illustrative example of mismanagement and misdirected market strategy. It also involved thousands of crores of public money, issued as loans by public-sector banks, remaining unrecovered following the closure of the company. As the book provides detailed accounts of issues such as asset reconstruction, liquidation of companies that are unable to pay debts, and other instances of financial strain on companies, a few recent cases would have illustrated the laws better.

The book invites the reader to compare corporate governance frameworks across the globe. However, it seems to argue for uniform corporate laws. In fact, there is a certain privileging of the corporate governance frameworks in the developed world. The book does not adequately problematise the specific socio-economic and historical conditions of developing countries, where giving a free rein to corporates might not lead to a socially equitable model of growth. Some significant issues about the public interest served by corporates are raised but not fully explored.

The comparative study of corporate practices across the world provides some important lessons for emerging economies such as India. For instance, South Africa has the provision for a “public interest score” for a company. Instances like this provide a pointer to the larger role that corporates could be mandated to play instead of merely becoming profiteering engines.

The book addresses the need for clarity in tax administration and tax regimes. However, it does not raise questions about the extent to which tax benefits and concessions to corporates have contributed to the economy. Also, the issue of deliberate tax avoidance by corporates cannot be glossed over. This includes practices such as round-tripping of money through tax havens and creation of fictitious shell companies. The book, while advocating transparent tax administration, does not adequately highlight these critical issues. It seems to be premised on an assumption that a transparent and corporate-friendly tax administration will essentially lead to market-based economic growth. It speaks about reforms in the legal, economic and social apparatuses of developing nations to pave the way for a free market economy. This approach does not emphasise the need for taxation of corporates and the super-rich for the purposes of redistributive justice.

The book is a useful compendium of laws for corporates and businesses. But it does not engage with some of the critical debates of the times about the role of corporates in the economy and the need to curb corporate malpractices.