Till the collapse of the South-East Asian economies in 1997, corporate governance was not a buzzword, recounts N. Vittal in Roots of Effective Governance. These economies were booming and some of them were called `tiger', but suddenly there was a meltdown of the currencies - in Thailand, followed by Indonesia, Malaysia, and South Korea - as you may remember. The main cause for the disaster was crony capitalism and lack of corporate governance, observes Vittal.
He identifies two factors that impact corporate governance. One, the attitude and values cherished by the enterprise management, and, two, the external environment in which the business operates. "If the quality of public governance suffers, corporate governance then becomes more difficult," he adds. "If the environment in which it operates is not clean, then corporate governance may not be successful, or even if successful, it will find it very difficult to operate."
Yet, there should be a continuous effort at sensitising the people about the need for good corporate governance, insists Vittal. "Because, however good may be the operational systems and procedures, if the people who are operating the systems do not have the right values, we will not succeed."
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