Corporate Governance Reforms in India – Accommodating Local Culture Along with the Drive for Global Convergence

Abstract

Can there be a successful global meeting or convergence of broad corporate governance norms or is it merely the stuff of fantasy? India, over the years, like a few other developing countries in Asia and outside, brought in a spate of corporate governance reforms based on the American model and these have not had the highest success rate. This article analyses the evolution of corporate regulation in India starting from the pre-independence era (prior to 1947) up to 2013. The look at the past helps one understand the Indian business structure, institutions and culture which is essential to understand why a lot of the Anglo-American corporate governance norms imported into the country have failed. A wake up call was sounded when Satyam Computers orchestrated one of the biggest accounting frauds in the country and Indian legislators came to realise that it was not enough to transplant western norms into an environment that probably did not have the corresponding infrastructure. This article therefore studies the Satyam case and illustrates the inadequacies of the reforms effected up until then. Responding to Satyam, India enacted the Companies Act, 2013 which attempts to adapt the international norms specifically to the Indian situation. Does this give convergence a better chance of success? An analysis of the provisions of this new law as well as industry reactions seems to answer this question in the affirmative. However, much of the success depends on its implementation and it remains to be seen if it is indeed a success story.