Corporate governance has become a very important business issue in the last decade. Many of corporate governance mechanisms like `Audit Committee' have gained prominence in this period. Besides, new regulatory norms legislations were also introduced. On the other hand, organizations like OECD are also coming out with corporate governance guidelines and trying to promote voluntary corporate governance practices which are universally accepted. In the first paper, "Global Governance Practice: The Impact of Measures Taken to Restore Trust in Corporate Governance Practice Internationally", Rolph N S Balgobin analyzes the effectiveness of these measures through a literature survey. His study points out that management research in the field of corporate governance also increased sharply during this period. It also highlights the theoretical underpinnings in the corporate governance developments. The analysis concludes that though the legislative changes indicate some positive changes in improving the corporate governance practices, they still have a long way to go. Similarly, the study suggests that bringing uniformity in corporate governance practices across the countries will also take more time.

New regulatory developments in corporate governance systems greatly affected the financial institutions, as they were already tightly regulated by the central banks of the concerned countries. In the second paper, "Banking Sector Governance: Lessons from Hong Kong Listed Banks—A Three-Year Perspective", Lisa Barnes studies the changes in the governance structure of the 12 listed banking entities in Hong Kong. Using a case study approach, the paper discusses the changes in the important corporate governance structures of the banks over a period of three years (2004-06). It also talks about the corporate governance mechanisms, such as Chairman-CEO duality, changes in the percentage of independent directors in the board and qualifications of the directors. The results indicate that the corporate governance practices of the listed firms under study have improved in the last three years in line with the expectations of regulators who want to maintain Hong Kong's status as a financial hub.

Most of the corporate governance mechanisms developed in Anglo-American countries focus on shareholder protection rather than stakeholder protection. But the relationship model countries have also started adopting those mechanisms in recent years. In the third paper, "Family Firms' Performance and Agency Theory: What's Going on in the Italian Market?", Stefano Caselli, Alberta Di Giuli and Stefano Gatti discuss the effect of control structures prescribed by agency theory on the performance of family controlled firms of Italy. The agency theory suggests that the performance of the firm depends on how far the interests of the managers (agents) align with that of the investors (principals). It is possible to reduce the agency cost by increasing the shareholdings of the insiders/managers or blockholders or foreign investors. The paper suggests that such agency theory measures have become redundant in the Italian firms which are managed by the founders. It is because of the control exercised by the founder is good enough to reduce the agency costs and there is no need for additional measures. On the other hand, in the non-founder family firms, i.e., the firms where the successors of the founders manage the firms, the above-mentioned measures are effective in improving some of the performance parameters.

Audit Committee is one of most important corporate governance mechanisms of the Anglo-American model. In the last paper, "Audit Committee Support and Auditor Independence", Zulkarnain Bin Muhamad Sori, Shamsher Mohamad, and Siti Shaharatulfazzah Mohd. Saad highlight on the relationship between the characteristics of Audit Committee and independence of the external auditors. The paper uses an empirical approach to study the relationship between auditor independence and audit committee parameters such as number of meetings of audit committee; details given in the audit committee report in the annual report; roles to approve and review audit fee; and composition of audit board in Malaysia. The results suggest that auditor independence is positively associated with the mentioned parameters, which in turn means that audit committee plays a vital role in ensuring independence of the external auditor in Malaysian firms.

-- S Subramanian
Consulting Editor