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CORPORATE GOVERNANCE; CONCEPT AND FUTURE ASPECTS OF CORPORATE GOVERNANCE IN INDIA

Author: Tarun Lohani, IV year of B.B.A.,LL.B. from (Faculty of Law), Integral University, Lucknow



India is always well known for its culture and ethics. There are many many reasons for which India is known all over the world, among which one of the most complicated factors for which it is known is for its market. The Indian market, well, of course, is the most complicated all over the world, and the concept which leads to doing so is none other than “Competition”. The competition especially in today’s market is so we can even say is like impenetrable to the peak that almost it is very hard for anyone to enter and go through such a kind of market. Leave the new firms and companies, it is not even unchallenging for the existing ones. This is so because the Indian market is very flexible, always keeps on changing, always tends to fluctuate. The one key-concept which enables the firms to grow here is “Opportunity”.


Business opportunities are like buses, there's always another one coming.

The quote above is sufficient to explain the concept of the Indian market.

All the corporations and business entities are engaged in finding opportunities and for that, there are numerous amounts of elements in which corporations must focus, but for finding the opportunities a company first must ensure the sound position of its internal management. Until and unless a company is not able to deal with the insiders, then how will it be dealing with the outsiders? In other terms, if the Internal factors of the company are not well settled, then it cannot or even should not think to contract with the External. Factors. Therefore, to resolve such kinds of issues a company must follow an (ethical rule principle), to ensure the betterment of its interior management known as Corporate Governance.


Concept of Corporate Governance

Corporate governance is in its simplest terms is all those systematic and structured rules, practices, principles through which a company is controlled. Basically, to improve and to maintain the interests of various stakeholders which exist there in the company like (shareholders, creditors, suppliers, financers, etc.) and the community. Apart from this, it is considered as one of the fundamental and promising tools for achieving the company’s objectives with efficiency and effectiveness as much as possible. The reason it can achieve results in a very efficient manner because it tends to focus on every domain of management that is to form the primary stage i.e. (Planning) till (Controlling).


The board of directors (BOD) of the company are the ones to ensure the process of corporate governance to go in a manner it must go. The directors are responsible that the process of corporate governance must be enforced fairly as bad corporate governance may create hesitation on a company’s integrity and reliability and even on transparency as well.


Need for corporate governance

It is a need but above that, it is a mode of survival for each company. There are many reasons as to why a company must follow this concept.

· It allows a company to show its reliability and integrity through which it can build its trust with investors and community which is very beneficial for its growth.


· Corporate governance helps promote financial viability by creating a long-term investment opportunity for market participants.


· There are many shareholders and other stakeholders for whom sometimes it is not enough for a company to be only profitable. Apart from this, they also willing to know the determination of the company towards corporate citizenship by way of environmental awareness, behaviour related to ethics and morals, for which a company must practice and follow corporate governance.


· In today’s market where there are so many complications because of (Globalization), the importance of corporate governance is growing. As because, corporate governance is a reliable tool or reliable way of ensuring the transparency of the business entity always tends to ensure the interest of all the stakeholders is safeguarded.


Corporate Governance and Sustainable Development

Before proceeding further, it is important to be aware of the term (Sustainable development). According to (Brundtland Commission report)[i], sustainable development is “the one that satisfies the needs of the present without jeopardizing the ability of future generations to meet their needs.” To achieve this long-term corporate sustainability goal, the sustainable development concept is built on top of three important “pillars” that must be fulfilled by companies: economic development, social equity, and environmental protection.


Relationship between Corporate Governance and Sustainable Development

Nowadays, it becomes important for every company to focus not only on having more and more profit or the returns for shareholders as their dividends, or on their issues which are commonly addressed by corporate governance. They should also start to focus on the welfare of society and this planet as well. Companies should also begin to frame policies regarding the (3 dimensions of sustainable development).


Particularly due to climate change, some companies are working hard on the environmental pillar, trying to prove to consumers that they are responsible for the environment so that their reputation is protected, and they can benefit from it. This is one of the major reasons for boards' interest in the environmental performance of the companies they manage and why they are providing information about these issues. This information is very useful for attracting "socially responsible investors" who closely follow the behaviour of these companies.

Future of Corporate Governance in India

Although corporate governance in India is not somewhere perfectly settled and has a long way to go to the best place in the world. Many CEOs now feel that their companies need financial and human capital to develop the standards necessary to survive the international competition. The stakeholders nowadays are very aware of the market and they start analyzing each and everything about a company to pass it in terms of corporate governance. Therefore, the CEOs and the owners of the company are well known about corporate governance. They also understand that such capital will not be available in a non-transparent corporate regime that is bereft of international quality of disclosures and accountability.


Corporate Governance is an increasing trend concept which in future might be able to expand further in India. The type of market India is having now is very different from that of the future. So, it can be said that the theory of corporate governance will be applicable in every company with some more and advanced modifications and policies in India. Business entities will use this concept to raise their (Brand Power) as because,


“Your brand is what other people say about you when you're not in the room,”


-Jeff Bezos


Therefore, to apply the above statement, a company must seek and go after the hypothesis of (Corporate governance).

[i] Brundtland commission report on sustainable development

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