Articles by D N Ghosh

A systemic failure of epic proportions in organisations and institutions that are the foundations of market capitalism is unfolding. This essay takes a broad overview of the nature of the improprieties that led to the collapse of corporate governance systems in some of the largest US corporations. The behaviour of professional managers who run these corporations as well as the supporting self-governing institutions and corporate boards is then discussed in the context of the capital market-driven governance systems within which they operate. The essay concludes by raising a few issues of regulatory accountability that the recent happenings have thrown up.

The progressive deregulation of the financial market has brought about major changes in the relative position of the different players in the market. Against the backdrop of the evolving relationship between the state and the market, this essay focuses on three interrelated issues the current institutional environment, adaptive efficiency and issues of governance.

To argue for development of national champions in the financial sector is not blind economic nationalism, nor is it protectionism or an alternative to competition. The authorities have to plan to develop and retain a few key institutions, but certainly it will serve no purpose if these institutions do not and are not enabled to come up to accepted international standards. Lessons from the story of the submission of the City, one-time symbol of British financial power and dominance.

The interrelationships between governments and markets in international finance are indeed complex. The international community has to veer round to some controlled and deliberate move to 'disintegrate' the international economy and curb the fluidity and volatility of international money flows causing extreme fluctuations in exchange rates and detracting from the benefits of international trade in goods and services. Cooperative crisis management would be the toughest challenge for the international financial community in the coming decade.

Government, it appears, does not wish to disturb the ownership pattern of the public sector banks. In that event it has to show the political will to build upon the foundations of the existing public sector banks and purge them of their institutional debilities. The finance minister should have made it clear that the interests of the employees and of the incumbent managements can be safeguarded only within the boundary limits of what the bank and the system can absorb, that is, without eroding the rights of the other stakeholders.