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INTRODUCTORY
The growing role of market in the world, i.e. market -oriented economy in the
later part of the 20th century has led to the spread of capitalism, globalization,
liberalization, privatization, demanding efficiency, corporate culture, model
code of conduct and business ethics for the very survival of the corporate
world. The concept of corporate governance emerged in the late 1980’s when
several companies collapsed in U.K. because of inadequacy of operating
control. This led to the setting up of “Cadbury Committee” on corporate
governance in 1991 by the London Stock Exchange. Further a numbers of
scams and frauds that have surfaced during the last three decades have also
shocked the confidence of the investors. In this research, an attempt has also
been made to discuss the famous scams in addition to corporate governance.
Most of the Indian companies have the family members on the board of
directors. Although the companies use public money in the form of share
capital but most of directors belong to the same family. They control all the
decision making processes and the small investors have no role to play in
decision making and control. This is because the majority of the investors in
India are small-scale investors. However, the amendments in the Companies
Act, 2000 has tried to plug the lacuna by inserting a provision for appointment
of a representative director for small scale investors. Through this thesis, the
researcher has tried to interpret technical provisions into simple language
which can be understood even by laymen.
The purpose of the present study is to cover the complete scenario of corporate
governance and corporate social responsibility and make an insight in to the
people who are responsible for good governance of company. This research
work will also analyse a comprehensive view of the governmental approach
towards corporate governance and corporate social responsibility issues in
India.
It is said that a problem is what gives us power and energy to solve them as
every problem has in it seeds of its own solution. This statement signifies the
need of defining the objective of research. An attempt has been made in this
research work to study and understand the important facets of the corporate
governance and corporate social responsibility in comprehensive way and to
achieve new insights into it.
9. To point out the possible defects and loopholes in the existing laws
relating to corporate governance.
10. To suggest the reforms and remedial measures for the prevention and
control of corporate scams. ^
The main aim of the present study is to understand the judicial interpretation
of the prevalent laws relating to corporate governance at national level. The
study also attempts to find possible implications of the recent corporate scams.
The study is important both from the theoretical and practical point of view.
On a theoretical level, it reveals the judicial appreciation of all the important
facts regarding corporate governance and corporate social responsibility. On
the practical level, it would cover the extent to which present law meets the
requirements of the day by protecting the people against various corporate
scams and promoting corporate social responsibility. The practical utility of
work also lies in the fact that how the policy making institutions may remove
ambiguities surrounding the corporate governance and corporate social
responsibility.
The books are the most quietest and most constant of friends, they are the
most accessible and wisest of counselors, and the most patient of teachers. No
thesis can be written without consulting good books and articles. One of the
steps for starting the work on problem is to review the existing literature on
the subject. After indentifying a problem, it is imperative to consult literature
on the subject as the answers you get from literature depends on the questions
you pose. The review of the existing literature not only provides clarity of
concept and understanding of different aspects of the subject but also helps in
avoiding repetition. It further helps in indentifying the problem zones. It also
gives ideas in formulating research methodology. A number of books,
monographs, reports, research papers and articles deal with the subject of
corporate governance and corporate social responsibility.
1. Books
e. P.V. Khatri and Indu Baghel in their Book “Corporate Social Responsibility
Challenges in the Age of Globlisation” cover the basic ideas-traditional as
well as modem scenario, social and ethical policies and other related to
corporate citizenship. This book is an up to -date comprehensive study
covering the whole spectrum of the social responsibilities of the corporate
sector. It also cover the issue of corporate social responsibility in China,
Africa and East Asia. . '. I' <■'
g. K.M Gosh and Dr. Chandratre’s in their Book ‘‘Company Law with
Secretarial Practice” have exhaustively dealt with the provisions of
Company Act. They have examined the provisions of company law in detail
and highlighted the importance of good governance practices.
h. C R Datta in his book “The Company Law”, has evaluated the various
provision of the Companies Act with latest cases. He has critically deal with
the subject of corporate governance highlighting relevant provisions of the
Companies Act. Appendix of this book is very good.
i. A.K. Majumdar and G.K. Kapoor in their book “Company Law” have
presented the Companies Act in simple and logical manner along with latest
legal decisions, notifications, clarifications and SEBI Regulations. The writers
have subjectively discussed the topic of corporate governance , Depositories
Act, 1996 and E-Govemance and E-filing along with latest amendments.
j. N.D. Kapoor in his book “Elements of Company Law” has explained the
fundamentals principles of Company law in a plain , easy and intelligible
language. The Companies Act, 1956 which governs the Company Law in
India, is formidable document. It requires a great deal of time, patience and
preservance to understand thoroughly the intricacies of the subject.
2. Articles
b. H.N. Gosh in his article “Can Corporate Governance Audit Campaign held
Corporates remain resilient to pressures?”, has emphasized on the
importance of corporate governance. He has also discussed the responsibilities
of directors. He has examined the functioning of audit committees towards the
corporate governance, fie has also briefly discussed the persons who are
responsible for internal controls and help of globalization to corporate in
improving efficiency.2
1 S.N. Mahapatra and Sanjay, “Corporate Governance vs. Corporate Crime” Management
Accountant, May 2004, pp. 387 - 390.
2 H.N. Gosh, “Can Coiporate Governance Audit Campaign held Corporates remain resilient to
pressures?” Chartered Accountant, June 2005, pp. 1725 - 1729.
c. P.N. Shah in his article “Role of Audit Committee in Improving Corporate
Financial Reporting”, has examined the role of audit committee in improving
corporate financial reporting. He has also briefly discussed the Birla
Committee on Corporate Governance, Clause 49 of the listing agreement,
some provisions of Companies Act, 1956 ^elating to audit committee and
Naresh Chandra Committee on Corporate Governance.3
3 P.N. Shah, “Role of Audit Committee in Improving Corporate Financial Reporting”, Decision,
Vol.30, No.l, January -June, 2003, pp. 41 - 60.
4 N. J. Jhaveri, “Corporate Governance: The Concept and Its Implications in the Indian Context”, ASCI
Journal Of Management 27 ( 1&2), pp. 62 - 70.
5 M K Datar, “Corporate Governance in Financial Intermediaries”, Economic and Political Weekly,
January 24 2004 pp. 328 - 332.
6 Dr. R Satya Raju, “Corporate Governance in a Changing Environment”, Indian Management ,
March 2000, pp. 42-47.
g. G Suresh in his article “The Origin of Corruption”, has critically discussed
the concept of corruption in corporate sector and its effect on Corporate Social
Responsibility.7
7 G Suresh, “The Origin of Conruption”, Indian Management, March 2000, pp. 48 - 52.
8 Reetesh K. Singh, “Corporate Governance: A Conceptual Framework” , Business Analyst, Vol. 24,
NO.2, July-December, 2003, pp. 47 - 53.
9 Dr. Satyanarayan Dash , “Corporate Governance in India: Meeting Challenges of Globalisation”,
Industrial Engineering Journal, Vol. XX3 No. 4,April 2002, pp. 2-6.
10 Mohi-ud-din Sangmi, “Corporate Governance in India A 21st Century Perspective,” The Business
Review, Vol.6, No.l&2, pp. 55 - 74.
11 Dr. Onkar Nath Dutta, “Corporate Governance-Codes and Ethics”, Growth, Vol. 33, No.4, Jan-Mar,
2006 , pp. 10 - 15.
governance. An appraisal of the corporate governance practices in India, the
focal point of the article, lead us to indentify the major deficiencies associated
with it. This article concludes that full convergence with international
accounting and audit standards better protection of minority investors rights
and stronger enforcement of existing law and regulations are some of the areas
1
that require adequate attention in the near future.
m. V.K. Bhalla in his article “Corporate Governance: Agency Costs and the
Politics of Finance”, has elaborately discussed the importance of finance in
corporate governance.13
12 Dr. Debaish Sur and Kaushik Chakraborty, “Corporate Governance in India-An Appraisal”, Growth,
Vol. 33, No.4, Jan-Mar, 2006, pp. 22 - 28.
13 V.K. Bhalla, “Corporate Governance: Agency Costs and the Politics of Finance”, Chartered
Secretary, January 1997, pp. 24-26.
14 Parthasarathi Banerjee , “Corporate Governance and Competence in SME’s in India”,Tech Monitor
, May- Jun 2005, pp. 43 - 49.
15 Rohit Raj Mathur,“Corporate Governance: Emerging Challenges before Public Relations”, South
Asian Journal of Management, Vol. 7 No. 1&2, pp. 91 - 95.
reference to banks. He has also discussed the role of RBI in corporate
governance.16
22 Dr. S.D.Israni, “Independent Directors- The New Movers & Shakers of the Board?”, Chartered
Secretary, August 2003 , pp. A 269 - A 271.
23 Ranjan Mukherjee in his article “The Ultimate Result of Corporate Governance: Value
ee. Oliver Hart in his article “Corporate Governance: Some Theory and
Implications”, has attempted to provide theoretical framework for the
corporate governance debate and to derive some implications which may be
o1
useful as a guide to policy.
ff. James A Brickley, Clifford W. Smith, Jr. and Jerold, in their article
“Corporate Governance, Ethics, and Organisational Architecture”, have
observed that successful companies assign decision-making authority in ways
that effectively link that authority' with the knowledge and experience need to
gg. S.C. Das in his article , “Corporate Governance in France”, has observed
that the corporate governance system in France is different from the Anglo-
American system and the German model of governance. It has a choice of two
different systems of board governance with PDG in absolute power. He has
also opined that although the governance system in France has shown
dynamism and accountability over the years. France seems genuinely
uncertain about the much needed development of its corporate governance
system. He has also explained the present governance system and its impact
O'!
ii. R.K Mishra and B. Navin in their article “Corporate Governance & Public
Enterprise Boards”, have discussed the concept of corporate governance
-ac
with reference to public enterprise boards.
jj. Igor Filatotchev and Steve Toms in their article “Corporate Governance and
Financial Constraints on Strategic Turnarounds”, have discussed the
strategy making and good governance.36
32 James A Brickley, Clifford W. Smith, Jr. and Jerold, “Corporate Governance, Ethics, and
Organisational Architecture”, Journal of Applied Corporate Finance, Vol. 15 Number 3, Spring
2003 pp. no 34-45.
33 S.C. Das, “Corporate Governance in France” The Management Accountant, November 2004, pp.
918-921.
34 Ananya Mukherjee , “Corporate Governance Reforms in India”, Journal of Business of Ethics,
2002, pp. 249-268.
35 R.K Mishra and B. Navin, “Corporate Governance & Public Enterprise Boards”, Productivity, Vol.
40, No. 4, January-March,2000, pp. 544 - 550.
36 Igor Filatotchev and Steve Toms “Corporate Governance and Financial Constraints on Strategic
Turnarounds”, Journal of Management Studies, May 2006, pp. 407 - 433. '
governance. He has also observed that one should not forget that corporate
governance is only a sub set of overall political and societal standards of
integrity and transparency.37
00. Kamal Gosh Ray in his article “Corporate Governance and Reporting
Practices in India: A Study”, has analysed the issue relating to corporate
governance and various reporting practices in India.41
pp. B.B. Pradhan and S. Pattnaik in their article “Corporate Governance and
Shareholder Value Analysis”, have overviewed corporate governance and
shareholder value analysis in different perspectives. They have also observed
qq. Rajeev Sinha in his article “Corporate Governance and Shareholder Value
Analysis”, has critically examined the response of shareholder vis a vis and
corporate governance.43
42 B.B. Pradhan and S. Pattnaik, “Corporate Governance and Shareholder Value Analysis”, Journal of
Accounting and Finance, Vol. 17 No.l, October 2002-March 2003, pp. 73 - 80.
43 Rajeev Sinha, “Corporate Governance and Shareholder Value Analysis”, Global Business Review,
p. 1 to 16.
44 Ronald C. Anderson, Thomas W. Bates, John M, Bizjak, and Michael L. Lemmon, “Corporate
Governance and Firm Diversification”, Financial Management, Spring 2000, pp. 5 - 22. *
45 C. Gopinath, “Corporate Governance Failure at Enron”, ICFAI Reader, May 2002, pp. 49 - 52.
varying degree. So, an appropriate blend of the different factors would
determine strategic leadership for success in corporate governance.46
uu. M.K Chouhan in his article “Changing Role of Nominee Directors”, have
critically analysed the role of nominee directors in context of corporate
governance47
D Research Methodology
46 Vinod Javeri, “Corporate Governance Through Strategic Leadership”, Business Perspective, Vol. 5,
No.2,pp. 11-16,
47 M.K Chouhan, “Changing Role of Nominee Directors”, Business Barons, August 2002, p. 16.
48 Syamlal K. Ghosh and Shailesh Budhia, “Corporate Governance: How Effective Is It?”, Indian
Accounting Review, Vol.9 No.2, December 2005, pp. 57 - 72.
E. CHAPTER SCHEME
The present research work has. been divided into eight chapters. These are as
under: