Understanding the Changing Dynamics and Overhaul of Corporate Governance in India
Corporate governance refers to the accountability of the Board of Directors to all stakeholders of the corporation i.e. shareholders, employees, suppliers, customers and society in general; towards giving the corporation a fair, efficient and transparent administration. The need for corporate governance has arisen because of the increasing concern about the non-compliance of standards of financial reporting and accountability by boards of directors and management of corporate inflicting heavy losses on investors. Most listed companies and large corporate groups in India were born as family-owned businesses, with family members occupying managerial positions and making all the key business decisions. This also meant very little distinction between the company’s finances and that of the family owners. With the evolution of the equity markets though, many of these family-owned businesses listed themselves on the exchanges. Today, India’s corporate governance framework requires listed companies to have independent directors manning one-third of their Board, disclose all related party deals, disclose comparative metrics on managerial pay, appoint audit and nomination committees, and require the CEO and CFO to sign off on the governance norms being met in the financial statements. Minority shareholders with 10 per cent voting rights also have the right to drag companies to Court for ‘oppression and mismanagement’. By this paper, the authors intend to examine the concept of corporate governance in India with regard to the provisions of corporate governance under companies act, 2013. The paper will highlight the importance and need of corporate governance in India and Loopholes in the auditing process in the wake of the aftermath of the Satyam Fiasco. We will also discuss Implications of the satyam scam on Corporate Governance in India with important case laws.