Corporate governance mechanisms are in place to ensure that the managers (agents) act with an objective of creating wealth for the shareholders. Such wealth creation will occur when the firm performs to its fullest possible capacity. So, the corporate governance mechanisms can be considered to be effective only when they are positively related to the firm's performance. However, literature on corporate governance provides mixed evidence about the effectiveness of corporate governance mechanisms in improving the firm's performance. The first paper titled, "Corporate Governance Mechanisms and Firm Performance: A Survey of Literature", by Manpreet Singh Gill, T Sai Vijay and Subhash Jha reviews the literature on the relationship between firm performance and the three most important corporate governance mechanismsboard characteristics, disclosures and ownership structure. After highlighting the importance of the three identified corporate governance mechanisms, the authors review the literature on the relationship of these mechanisms with the firm performance. Their literature survey indicates that it is not possible to argue definitively that corporate governance mechanisms always improve firm performance. The disclosure levels seem to be related with firm performance in line with the expectations. However, the literature on the other two corporate governance mechanismsboard characteristics and ownership structure provide inconclusive results about their relationship with firm performance. Literature indicates both, positive and negative relationship between firm performance and certain board characteristics like `board size' and `board composition'. On the other hand, the relationship between firm performance and ownership concentration is either positive or non-existent. Moreover, the literature survey points out that most of the work has been done in the context of the developed economies. This indicates a gap in this research topic with respect to the developing economies.

While the first paper reviews the literature on the relationship between firm performance and corporate governance mechanism, the second paper provides an empirical analysis of such a relationship in UK context. In their paper titled, "The Cadbury Code Reforms and Corporate Performance", by Phillip J McKnight, Nikolaos T Milonas, Nickolaos G Travlos and Charlie Weir, the authors investigate the performance of the UK's listed firms before and after adopting the Cadbury committee's Code of best practices. After briefly reviewing the literature, the authors provide the hypotheses for the relationship between firm performance and various corporate governance practices recommended by the Cadbury Code. They test the hypotheses using a sample of 148 listed firms and find that the results are mixed. Overall, the results indicate a positive association between firm performance and the adoption of the Cadbury Code. However, the results are mixed regarding the relationship between firm performance and the adoption of key recommendations of the Cadbury Code. The practices like the establishment of an audit committee and/or remuneration committees are positively associated with firm performance. However, there is no positive association between corporate performance and the proportion of shares owned by the directors. Similarly, the Chairman-CEO duality is also not associated with firm performance. The paper provides some important policy implications also. For example, the findings on the relationship between firm performance and the proportion of shares owned by directors suggest that, the board restructuring following the publication of the Cadbury Code has indeed eliminated managerial entrenchment.

The benefit of improved firm performance can be expected only when the firms adopt the Code of best corporate governance practices notified by the regulator. In developing countries like India, we need to first verify whether the firms follow the code of corporate governance practices notified by the regulator before analyzing its impact of firm performance. The third paper titled, "Corporate Governance and Indian FMCG Industry", by Hitesh J Shukla, investigates the adoption of corporate governance practices of the top four firms operating in Fast Moving Consumer Goods (FMCG) market in India, using the case study method. The firms considered by the author were Hindustan Unilever, ITC, Nestle (India), and Tata Tea. The qualitative analysis is followed by a quantitative rating of the corporate governance practices of these firms. The analysis indicate that the firms comply with the mandatory requirements of Clause 49 of the listing agreements which, lays down the corporate governance practices to be adopted by Indian listed firms. However, the firms need to improve their practices in adopting the non-mandatory requirements.

- S Subramanian
Consulting Editor