Corporate Governance in India: The Transition from Code to Statute

In Jean J. du Plessis & Chee Keong Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critical Analyses (Switzerland: Springer International Publishing, 2017) 97-114

21 Pages Posted: 18 May 2018 Last revised: 1 Jun 2018

See all articles by Umakanth Varottil

Umakanth Varottil

National University of Singapore (NUS) - Faculty of Law

Date Written: May 4, 2018

Abstract

This paper explores the evolution and implementation of corporate governance norms in India. While India initially jumped on the bandwagon of countries adopting voluntary codes of corporate governance following the Cadbury Report, the approach towards “soft law” was rather quickly jettisoned in favour of a mandatory approach towards corporate governance. As a result of more recent reforms, corporate governance norms have now become well ensconced almost in their entirety in the primary corporate legislation (a phenomenon this paper refers to as the “ultra-mandatory” approach), arguably more so than most jurisdictions. As this paper demonstrates, voluntary codes are ill-equipped to serve their goals in dissimilar jurisdictions, as their success is dependent upon a cocktail of factors that may not be present in all legal systems. Considering an emerging economy like India as an example, it is clear that in the absence of such factors corporate codes merely perform lip service, and do not carry any functional effectiveness. However, in India’s case, the pendulum has swung far afield towards mandating corporate governance in that it has resorted to legislative rulemaking that also attracts significant costs. This paper advocates for a milder form of the mandatory approach towards corporate governance that is consistent with the corporate structures and legal system prevalent in India, but is rid of the unnecessary rigours of the present approach.

Keywords: Corporate governance code, India, soft law, mandatory approach

JEL Classification: K22

Suggested Citation

Varottil, Umakanth, Corporate Governance in India: The Transition from Code to Statute (May 4, 2018). In Jean J. du Plessis & Chee Keong Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critical Analyses (Switzerland: Springer International Publishing, 2017) 97-114. Available at SSRN: https://ssrn.com/abstract=3173591

Umakanth Varottil (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

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