Challenges of Corporate Governance in India

India has liberalised its regulatory framework to bring its corporate governance standards into line with those of developed nations. However, creating good governance and ensuring the outcomes of such governance processes continue to rank highly among stakeholders’ goals even today.

• India’s ever-expanding corporate governance structure is still developing. Old rules and regulations do not meet the requirements of time. There has been consistent resistance from the old corporates to adopt the new principles of corporate governance.
• Rising Non-Performing Assets of companies.
• Enforcement of existing regulations is a major problem. Many government departments, many bureaucracy levels, and complex power balances between them prevent the enforcement of strict laws.
• India’s corporate sector has never been more successful in achieving better governance standards. There is a proliferation of businesses promoted by families. In many board rooms in India, the topic of CEO succession is rarely discussed.
• Civil society organisations are not yet fully aware of the importance of corporate governance; hence the investment climate in India has been silenced. As experience has shown, greater investor scrutiny can bring about significant improvements in corporate governance.

In terms of structural and regulatory changes, India has seen a number of enactments, including the 2013 Companies Act and the regulations governing SEBI’s listing obligations and disclosure requirements. These enactments have significantly strengthened governance standards and increased accountability through disclosures.