Law and Justice

Corporate Governance in India : Impacts and Challenges Ahead

The complex nature of business has increased due to separation of ownership and control and emergence of Corporate form of business organisation has allowed millions of stakeholders across the globe to own the business jointly and it has created chaos among the companies.

Various financial reports published for the companies provided information about the separation of powers and control of different types of companies. These reports are easy to be manipulated in the hands of the managers of the corporates. It results in breaking the trust of the stakeholders. This is the basic reason for emergence of Corporate governance. Nowadays the word ‘Governance’ has become a buzzword and is based on two pillars i, e
transparency and accountability. Again this governance is now ensured in Corporates and has given a new dimension and a new form as Corporate governance. Corporate Governance may be defined as the rules ,laws and processes by which one monitors, manages and controls the business as a watchdog. It encompasses the internal factors like the managers, stakeholders and the external factors like consumers, clients and emerging
regulations. Both the aspects are equally important to ensure responsible leadership, transparency and accountability in the system.

Transparency and Accountability are the key to growth, stability and profitability of any business. Good Corporate Governance is the need of the time which brings harmonious relationship and trust among the investors about the management.

After Independence India was flooded with various high profile scams like Stock market scam, Satyam scam, Ketan Parekh Scam, UTI scam, Harshad Mehta scam and recently Nirav Modi scam have exemplified poor and bad Corporate governance. These scams have set a benchmark for implementing good corporate governance in India for it’s growth and
development and strengthening the Indian economy. Now, the dichotomy remains what amounts to Good Corporate governance and what is bad governance?

When the leadership and management of the company works with it’s heart and soul with transparency and accountability in the interest of the stakeholders instead of it’s vested interest it amounts to good corporate governance otherwise if it lags in transparency then it leads to bad corporate governance. Bad governance affects the stakeholders directly and
very importantly breaches the trust of the investors. As a matter of fact, it should be noted that the shareholders are deprived of dividends because of creative accounting, managerial remuneration, free goodies to friends and families and risky mergers and acquisitions.

For any business today it requires well defined guidelines. Ministry of Corporate Affairs has framed new Companies Act repealing the old one which came into force in 2013 covering all the important aspects of governance and in this direction appointment of Independent Directors makes the board transparent and accountable. It also empowers minority
shareholders to drag the companies to National Company Law Tribunal.

In the present era of Globalization and Liberalisation new Companies Act 2013 is trying to keep pace with the need of the time and only time will speak to what extent it is successful in implementing good corporate governance in the certainty and predictability of law.

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