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Corporate Governance in Infrastructure Industry


Arunabh Borah, Nupur Dutta, Dr Anindita Chatterjee

Our paper investigates the influence of corporate governance on the performance of the organizations in the infrastructure industry. Corporate governance is the set of policies processes and laws affecting the way a company is administered or controlled. It aims to allocate resources in a way that maximizes value for the company’s stakeholders (shareholder, investor, employees, customers, supplier and community at large) and evaluates their decisions on transparency, inclusivity, equity, and responsibility. Different countries around the world follow different models of corporate governance. The difference in these models of corporate governance lies in the variety of capitalism in which they are embedded. India practices both Anglo-American model and business house models in the governance and hence this has led to a change in the Indian companies from family-owned and controlled structures to professionalize companies. Corporate governance on the internal structure and rules of board of directors, rules for information disclosure to its shareholder, compensation to the marketing person and control the management. An organization’s performance is directly correlated to the effectiveness of the governance applied by the corporation. This relationship between governance and performance is affected by numerous factors. The study is an attempt to understand and analyze the challenges faced by infrastructure organizations such as vulnerability to corruption frauds and mismanagement, political dynamics, lack of transparency and unstable regulatory frameworks in corporate governance.

Introduction

High-quality infrastructure is a prerequisite to support the development process and delivery of efficient public services. The growth of an economy is judged by its infrastructural presence in transport, education, health, and culture respectively. In a developing country infrastructure supporting the development process is of paramount importance. The infrastructure projects are highly capital intensive. Raising money for the same is challenging tasks. The provision of raising money by using the national levers to access international markets is at risk due to a lack of public governance mechanisms. The budgetary governance should be systematic and follow a standard framework. Poor governance leads to failure due to the timeframe, budget, and delivery objective.

German Model

This is a kind of European Model. Workers are considered as a key stakeholder and they are considered as participants in the decision making of the company. They follow a two-tier board model. The supervisory board and a board of management are the two tiers of the model. The supervisory board is elected by the shareholders. Employees elect their members for the supervisory board. This supervisory board is generally half or one-third of the board. The supervisory board furthers appoints the board of management and govern their performance. The supervisory board has every right to dismiss and reform the board.

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