Corporate Governance in India and the UK: A Comparative Analysis

Corporate governance is a relatively new movement; until recently, a business’ ultimate responsibility was
to make profits and increase its owners’ wealth. This meant corporations had very little incentive to act
responsibly, or the managers to be wary of the consequences before taking any major step, and the
regulators to enforce enhanced standards.

With greater regulation & increased scrutiny in the backdrop of the 2008 financial crisis in the United
States that had rocked the world over, the onus is now on the corporations to shift to the idea of corporate
citizenship: exercise rights and be liable to answer to not only shareholders but the customers, suppliers &
vendors, regulatory authorities, and many more stakeholders. Consequently, the stakeholder concept has
replaced the erstwhile shareholder concept.

Businesses now have a tight rope to walk on, balancing the interests of all, as any failure or shortfall leads
to public ire and a consequential regulatory action, strictures and penalties, imprisonment for the business
execs, and negative impact on the stock performance which, today, is largely viewed as being the
barometer for corporate success.

It is difficult to uniformly define what corporate governance means, though it implies doing the right thing
surrounding the most important pillars of a corporate machine: the board & its committees, senior
management, related party transactions, directorial remuneration, financial disclosures, and others.

This becomes especially important in the context of a publicly listed company given the large public
interest involved, the multitude of periodic and event-based disclosures it is reqd. to make, and the overall
increased regulatory scrutiny – across multiple jurisdictions of its operations.

With the emergence of Environmental, Social & Governance (ESG) as a concept, and too much focus being
put on the ‘E’ part of it, the ‘G’, symbolic of its last occurrence, gets the least priority. Every now and then,
uncovering of a corporate scandal