Captured Boards and Fractured Governance in a World of Cronyism - The Case of India

29 Pages Posted: 31 Jan 2017 Last revised: 2 Oct 2017

See all articles by Bala N. Balasubramanian

Bala N. Balasubramanian

Indian Institute of Management Ahmedabad; Formerly IIM Bangalore - Centre for Corporate Governance and Citizensip; Former Adjunct Professor

Date Written: October 1, 2017

Abstract

This paper examines the largely emasculated role of corporate boards of directors in effectively discharging their fiduciary obligations of promoting and protecting the interests of absentee shareholders. Although legislation and regulation in India, through the Companies Act and Listing covenants especially after their reforms in 2013 and 2014, mandate stiff independence criteria to empower directors to better achieve the desired levels of protection of shareholder and other stakeholder interests, the structural design and composition processes of boards suffer from lethal vulnerabilities that inherently militate against due performance by non-management directors. It also documents the evolution of cronyism over the years, provides a stylised model of up-stream (with government) and down-stream (with directors) business cronyism, and concludes with some suggestions aimed at minimising its adverse impact on board and director independence.

Keywords: Cronyism, corporate boards, corporate governance, board capture, India, up-stream cronyism, down-stream cronyism, independent directors, government-business nexus

JEL Classification: G30, G34, G38, K20, K22, M4, P17

Suggested Citation

Balasubramanian, Bala N., Captured Boards and Fractured Governance in a World of Cronyism - The Case of India (October 1, 2017). Available at SSRN: https://ssrn.com/abstract=2907630 or http://dx.doi.org/10.2139/ssrn.2907630

Bala N. Balasubramanian (Contact Author)

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat
India
+919167036140 (Phone)

Formerly IIM Bangalore - Centre for Corporate Governance and Citizensip ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Former Adjunct Professor ( email )

Vastrapur
Ahmedabad, Gujarat
India
+919167036140 (Phone)

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