Introductory remarks of
U.S. Consul General Henry V. Jardine
At a seminar on
"GOOD GOVERNANCE: GOOD FOR BUSINESS?"
American Center, Kolkata, Friday, March 28, 2008

March 28, 2008

Mr. Gulshan Sachdev,
Aileen,
Rahul,
Distinguished panelists,

Ladies and Gentlemen

I welcome you to the seminar on “Good Governance: Good for Business?”  We are meeting at a time when India is integrating with the global economy and Indian companies are learning the nuances of global corporate governance.

The U.S. Government is working with Indian partners, although our work concentrates on non-corporate organizations and governments.  But we also have stories to tell and I thank AMCHAM for providing the opportunity to exchange ideas and experiences.

Corporate governance refers to the rules that guide the behavior of corporations, shareholders, and managers.  It also refers to government actions that promote and enforce those rules.  Good corporate governance provides stable and productive business environment.

We have seen instances of corporate governance failures in the U.S. and Europe.  Such breakdowns, even in countries with well developed markets and economies, affected the lives of thousands of employees, retirees, savers, creditors, customers and suppliers.  Such incidents prompted an overhaul of our laws covering business behavior, in the form of the Sarbanes-Oxley Act of 2002.

Corporate governance is equally important in emerging-markets.  Economies in transition are dominated by large family-owned, state-owned, or foreign-owned companies.  These corporations do not have shares freely traded on local stock markets.  Also, non-corporate enterprises employ a large proportion of local employment and output.

India has had its share of governance failures.  In the 1992 Mumbai Stock Exchange scam, investors lost USD 1.8 billion.  This set in motion a series of measures to improve the governance of financial markets.  Despite such measures, another USD 30 million scam was discovered in 2001 involving the Kolkata Stock Exchange.

After the financial crises of 1997-1999 in Asia, Russia, and Brazil, the concern for global financial stability drew attention to the problems of "crony capitalism" and poor corporate governance in India and other emerging-market economies. 

Good corporate governance is more than maintaining sound financial systems or making statutory payments.  In India, it involves transforming political and economic governance arrangements from relationship-based systems to rules-based systems.  Rules-based organizations ensure good and transparent governance because they are driven by policy rather than personality.

I am happy to see AMCHAM – an organization of U.S. corporations -- initiating this seminar on this important issue. As India integrates into the global economy, it has to ensure global standards and practices in supplying commodity and services.  Most of India’s integration is taking place outside the government domain, in IT and in the manufacturing sectors.  Only a couple of days back, the TATAs acquired two global brands – Jaguar and Land Rover. Earlier, the steel industry witnessed major Indian acquisitions.

With Indian companies going global, managers, suppliers and associates have to calibrate their corporate governance standards with globally accepted norms. Not doing so would be “bad business”.

As India’s partner in the global economy, U.S. agencies are working with their Indian partners to develop appropriate governance practices.  Through its Financial Institutions Reforms and Expansion (FIRE-D) program, the USAID is partnering a number of state governments in India, including the Government of Jharkhand.  The FIRE-D is a capacity-building initiative to help Jharkhand’s fledgling government cope with development and service delivery issues.

There are other U.S. initiatives transferring governance best practices and ideas to Indian public institutions.  Let me mention here two such initiatives.  The USAID is working with Indian municipal administrators and councilmen to make municipalities self financing.  The Kolkata Municipal Corporation is included in the initiative.

The project is exploring innovative concepts like Pooled Finance and Municipal Bonds to ensure financial health of municipalities.  This in turn will ensure desired municipal infrastructure and services for citizens of Kolkata and other mega cities.  I understand that ensuring world-class municipal services in India’s cities is more of governance than a resource issue. The USAID-supported Mega Cities Association, launched in Kolkata in 2006, provides a platform for city managers to exchanges ideas and share experiences. 

I welcome you to this seminar and thank you for your time. I once again thank AMCHAM for providing the platform and the opportunity to highlight the importance of corporate governance for a globalizing India. 

Thank you.