Corporate Governance – The Indian Scenario

Prof. Richa Mishra
Prof. Gurbandini Kaur

Corporate Governance has been gaining momentum across the world due to miserable corporate failures unethical business practices, insufficient disclosure and transparence, inefficient management board and social concerns. As always, after a slew of scandals and corporate fraud there are cries of outrage, demand for bringing culprit to book, suggestions over how to improve corporate governance, setting up of another committee and corporate governance dominating the political and business agenda. Scams have almost become a regular feature; we had Harshad Mehta scam, Ketan Parikh scam, UTI scam, Bhansali scam and now Satyam Scam. The corporate frauds that we are witnessing today are of greater in frequency, intensity and magnitude. Thanks to the bubble of technology which has made these frauds more visible.

The basic reason for increase in rate of scams is the prevailing inequality. Inequality can be the greatest threat to corporation in today’s connected world. People can live in poverty but not in injustice.

The glorification of greed in corporations for the personal enrichment of the senior executives has worsened the inequality. The belief that corporations have to maximize only shareholders value can no more hold true in today’s scenario. The value of corporation is created by cooperation of various stake holders including employees, customers, suppliers and community at large, as the corporation’s goal should not be prosperity of few but of many.

The legal and administrative environment in India provides excellent scope for corrupt practices in business. As a result unless a management is committed to be honest and observe the principles of prosperity, the atmosphere is to tempting to observe good corporate governance in practice.

According to N.R. Narayanmurthy, Corporate Governance is no longer a luxury, but a necessity.  There is a gap between percept and practice of Corporate Governance.  Feudal mindset, manifold regulations, lack of concern for society, a sense of insecurity and greed are some of the reasons for it.

Today, corporate governance has become a buzzword and has entered into business school curriculum and is considered a part of corporate social responsibility.  Many consider it synonymous with CSR and organizations take pride in having a “good corporate governance” image.  However, the system is not without its failures especially in India and the question continues to haunt as to why does corporate governance, with all its noble intentions, fail at all.