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
Date Written: May 4, 2018
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: Suggested Citation