An Overview of Corporate Governance Reforms in India

Corporate Governance Reforms in India are of recent origin – the reform process got a kick start only with the liberalization of the Indian Economy in 1991. While the progress in legislating and introducing corporate governance reforms in India in the last two decades has been quite significant, so far these have largely remained on paper only. A major criticism of the Indian corporate governance reform process is that it is primarily based on the Anglo Saxon model of governance which has limited applicability in India. Unlike the central governance issue in the US or the UK which is essentially that of disciplining the management that has ceased to be effectively accountable to the owners (dispersed shareholders) the central focus of the corporate governance framework for India needs to be on disciplining the dominant shareholder, who is the principal Block holder, and in protecting the interest of the minority shareholders. Given that the Indian corporate governance regulations have largely borrowed from the Anglo Saxon model of governance, it is not surprising that they are found wanting in addressing issues that are peculiar to the Indian context and, therefore, do not provide an adequate solution to India’s corporate governance woes. Adding to the problem arising from the application of an alien corporate governance model, which was not suitably adapted to the Indian context, is also the problem of weak enforcement of corporate governance regulations through the Indian legal system which raises serious concerns on whether investors would be able to get timely dispensation of justice in case of corporate governance wrongdoings. Currently Corporate Governance Reforms in India are at crossroads; while there is no doubt about the good intention behind the reforms, there is a need to look for a more complete solution, evolved from within, and to craft a solution that would address the specific challenges of India. This paper provides a history of the evolution of corporate governance in India and identifies issues that are peculiar to the Indian context which are not being fully addressed in the current framework. Lastly, this paper gives some thought on the future direction for corporate governance reforms to make them more suitable for Indian conditions and identifies areas for further research in this field. This paper is work-in-process and the author invites comments and viewpoints from other fellow researchers interested in the Corporate Governance Reforms in India