Corporate Mis-Governance in Post-Independence India: Examining Government-Industry Nexus

Abstract

Corporate governance as it is understood today in the Indian context is the culmination of the liberalization process. Despite the implementation of certain corporate governance norms, Indian industry is found to be defaulting on compliance. While there certainly are flaws in government's enforcement mechanism, the paper examines historical precedents from 1960s onwards, that may have established a problem-ridden relationship between the Indian sate and different sectors of the industry. By probing corporate governance issues, we seek to unravel the government-industry ties that were a bane to the proper and efficient functioning of both entities. To explain our contention that the seeds of corporate misgovernance were sown as a result of government indifference and its belated response to mis-governance, we have chosen to focus on the banking business practices in India. Banking, as per our understanding, stands out as a better explananda of our 'abetment' contention due to a variety of reasons, which are listed in the main text of the paper. We conclude that had the government been more responsible and played its fiduciary role properly and had the industry seen the myopic nature of such a policy framework, latter day corporate governance problems could have been thwarted to some significant extent. In the end we suggest that government-owned financial institutions should define the purpose of their business in clear and unambiguous terms and endeavor to work for those objectives. Arbitrary political intervention in the functioning of regulatory bodies should be completely done away with and regulators need to be given the autonomy and powers to take decisions without being overawed by their political masters. Similarly, legal lead times need to be drastically shortened leaving no space for industry-state collusion.

Keywords: Corporate Governance, Compliance, Banking, Government-Industry Nexus