Enhancing shareholder capitalism

The ownership structure of Indian companies has had an outsized influence in shaping the country's corporate governance.

- AMIT TANDON

For starters, around 65 per cent of companies in the BSE100 are family-owned and family-run. This number only goes up as you move beyond the frontline indices. The data from the Nifty 500 too backs this up—promoters held 54.5 per cent of equity back in December 2015, which rose to 58.9 per cent by June 2020. Today they own about 51 per cent. While this is a drop from the peak, it is still more than what institutional investors and all other shareholders combined hold.

Given the concentrated ownership and control, external investors are willing to invest only when they can trust the company's governance and leadership. Since governance is essentially the outcome of interaction among regulators, the board, management, shareholders, and broader stakeholders, the role of regulation becomes crucial in ensuring balance and accountability across these relationships. In the Indian context, a few things stand out.