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Directors as Trustees of the Nation? India’s Corporate Governance and Corporate Social
Responsibility Reform Efforts
University of California, Davis - School of Law
May 30, 2011
Seattle University Law Review, Vol. 34, No. 4, 2011
UC Davis Legal Studies Research Paper No. 261
Corporate law in India has been fundamentally transformed since the early 1990s. In conjunction with significant economic liberalization, the Indian government has introduced a series of corporate law reforms aimed, in part, at creating a system of transparent, ethical, and accountable corporate functioning. Early reforms sought to implement rules and practices that addressed traditional corporate governance concerns, in other words the relationship between firm managers and shareholders and the relationship among different groups of shareholders, particularly majority and minority shareholders. More recently, not only has the Indian government implemented laws to address corporate governance matters, but it has also started addressing the corporate social responsibility (CSR) area.
This Article argues that the Indian government’s corporate governance and CSR efforts, while laudable in some respects, are problematic in their approach to the governance of Indian companies and reflect a view of the ownership and governance of Indian companies that does not necessarily address the fundamental governance issues that arise in Indian firms. India’s proposed corporate law reforms suggest imposition of detailed corporate governance rules without necessarily assisting directors in addressing the majority-minority agency problems of controlled companies. Moreover, India’s proposed CSR guidelines may further hamper independent directors and exacerbate some of the problems that this Article discusses with respect to majority-minority agency costs.
Number of Pages in PDF File: 31
Keywords: India, Corporate Governance, Corporate Social Responsibility, CSR, Clause 49
Date posted: June 1, 2011
; Last revised: August 4, 2011