In October last year, industry watchers and market participants were shocked when the ouster of then Tata Sons chairman Cyrus Mistry was announced. It was sudden, unexpected and uncharacteristic; coming from one of the largest conglomerates and one known for its ethics. Some 3 months later, another public battle in another large Indian company came to the fore. Infosys founder, promoter shareholder and former chairman Narayan Murthy raised governance-quality issues aimed at the company’s board of directors.
Many fund managers maintain that management quality and corporate governance are key in picking stocks for the long term. But a quick look at the stock performance and holding pattern of Infosys and some large Tata Group companies will tell you that investors are not selling in a hurry despite concerns.
Does governance matter?
It should matter because the genesis of fundamental analysis lies in identifying good quality management, which has the capability to sustainably drive earnings growth.
