The Promise and Challenges of India's Corporate Governance Reforms

Abstract

This Article examines India’s initial corporate governance reform efforts as well as reforms adopted in the aftermath of the Satyam scandal. An evaluation of India’s corporate governance reforms demonstrates that although extensive reforms have been instituted, there remain significant lapses in implementation and enforcement. Moreover, many of the reforms that have been adopted fail to address fundamental areas of concern such as the relationship between controlling and minority shareholders, the role of promoters, the limited activism of shareholders, including institutional investors, and issues with director independence. This Article expresses concerns that these challenges may prevail because they have been shaped by unique political and social forces. These forces include the traditional closed ownership structures of Indian firms, an ineffective institutional framework to support enforcement efforts, weaknesses in investor access to the courts, and political pressures related to government ownership of certain industries.

Keywords: corporate governance, India, Clause 49, Satyam

JEL Classification: K22