Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government, and the community.
An example is former ICICI bank boss Chanda Kochar approving a loan to Videocon for her husband’s benefit.
Insufficient experience and background diversity is a fundamental flaw in these boards. The board’s performance in the wider interests of shareholders has been questioned. No board member raised a red flag about IL&FS.
Separation of ownership and management is a big issue in family-run businesses, including some of India’s largest.
Independent directors are political and cannot check promoters unscrupulous conduct.
Executive Compensation is a hotly debated topic, especially when it comes to shareholder accountability. Stakeholders must be able to scrutinise executive pay.
Ways to Improve India’s Corporate Governance
Implement the Uday Kotak Panel’s recommendations, such as requiring listed businesses to have a minimum of 6 independent women directors.
Independent directors should be appointed with more transparency and be more engaged on boards.
Audit Committee must review over Rs 100 crore loans, advances, and investments.
Diverse boards are better: Diverse in this context includes gender, ethnicity, skills, and experience.
Reliable risk management procedures: A greater understanding of the risk-reward trade-offs that all corporations face.
Ethical policies and procedures should be the foundation of every organization’s behaviour. Assure separation of board and management responsibilities.
The Board should explore improving governance processes and resolving deficiencies identified in board evaluations.
Facilitating shareholder contact with the board is critical. It is necessary to offer a point of contact for shareholders.
Conclusion
Corporate governance is crucial in a developing country like India to attract both domestic and foreign investment.