Good Corporate Governance Practices

As a long time reader of your magazine, I found your coverage of ‘insider trading’ to be very informative and useful. My question is that how can we as investors gauge the corporate governance quality of a company?                                                                                                                                                                                   - Priya Singh

Editor Responds: Thank you for your appreciation. There are a number of factors one can take into consideration while looking at corporate governance for a company. One should look at the number of independent, non-executive and women directors in the board and their proportion to the total board size, frequency of board meetings, attendance in the board meeting by various directors, etc. In addition, investors should also pay attention for the presence of large volume-related party transactions, inter-corporate loans – especially loans to their own subsidiaries that have poor financials and performance. Many rating agencies such as CRISIL and ICRA even have their own corporate governance indices to help retail investors. Hope this helps! Do keep writing to us with your queries.