An Insight into Consequences of Non-Compliance or Colorable Compliance of Corporate Governance

Abstract

Non-Compliance of Corporate Governance means not adhering to the code of Corporate Governance. The non-compliance is not very serious because in case of non-compliance it is simple to identify the offender and penalize him, the serious matter is colorable compliance. The colorable compliance means, on paper it is inferred that code of corporate governance is adhered but actually it is not so hence it become very difficult to whom to rectify and what to rectify. Colorable compliance of Corporate Governance also leads to ineffectiveness of the corporate governance code. The non-compliance or colorable compliance of corporate governance standards is one of the primary factors resulting in corporate frauds or scandals. The corporate frauds in India occurred in recent times have resulted from a flagrant disregard of and non-compliance with the Indian Corporate Governance regime. Properly constituted audit committees and other committees play an important role in the sustained growth of a corporation and eliminate the corporate frauds. The colorable compliance with corporate governance norms often perceived in the entities dominated by the family members. Therefore, this paper is an attempt to highlight the state of non-compliance of corporate norms and factors responsible for colorable compliance.

Keywords: Corporate Governance, Colorable Compliance

JEL Classification: G30