In 2002, in a speech entitled, “Restoring Investor Confidence: The Key is Disclosure,” Peter K. Fisher, the Under Secretary of the U.S. Treasury at the time made several statements about the U.S. market that are just as applicable now to India.  He noted that investors have a fundamental right to company information.  In particular, “[i]nvestors should know two kinds of facts that corporate insiders know: first, the handful of key indicators of business value that management actually uses to assess the company’s current performance and near-term prospects, and second, the company’s real asset-liability ratio – the fundamental financial information about all of the company’s contractually-obligated assets and liabilities, whether on- or off-balance sheet.”

It is inevitable that calls for further reform in India will be met with some resistance.  Companies might argue that additional disclosure requirements are overly burdensome.  However, basic information of the sort that investors need is available to and relied upon by management on a regular basis and could easily be provided.  Otherwise, as Fisher noted, so long as “fundamental information asymmetries are allowed to persist, whole armies of independent directors, accountants, auditors, and regulators will fail to align the interests of insiders and investors.”  

This is the third of a series of three articles on corporate governance. Part I and II of the series can be found here and here.

Shubham 'shubi' Arora is a Texas based Attorney working for Akin Gump Strauss Hauer & Feld LLP. 

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