Corporate governance in India has witnessed a discernible decline over the last few decades, particularly when measured against the benchmarks set by developed nations. More recently, however, this decline has accelerated into a free fall. Driven by a volatile mix of corruption, systemic greed, eroded value systems, and the complexities of digital advancement, the ethical fabric of India Inc is under severe strain.
While the memory of legacy frauds — Satyam, Dewan Housing, Yes Bank, and the collapses of Kingfisher and Jet Airways — remains fresh, the recurring nature of these crises suggests a failure to internalise lessons. We have struggled to establish the 'checks and balances' or 'early warning systems' necessary to preempt such deterioration. Recent developments involving marquee names like Tata Sons, HDFC Bank, and emerging players like Gensol Engineering and Ola Electric illustrate a worrying trend.
Each case is distinct, but the underlying concerns are similar: transparency, accountability, fiduciary responsibility and adherence to stated commitments.
At Tata Sons, the debate over the tenure extension of chairman N Chandrasekaran has brought governance processes into focus. Reports suggest differences between key stakeholders on the duration of the extension. More importantly, the episode raises procedural concerns. A chairman seeking deferment of a decision on his own extension presents a clear conflict-of-interest situation. Established governance norms would require recusal and an independent evaluation led by the Nomination and Remuneration Committee (NRC), supported, if necessary, by external assessors. For an entity of such scale and significance, clarity and process discipline are non-negotiable.
At HDFC Bank, the resignation of chairman Atanu Chakraborty, citing misalignment with his personal value systems and ethics, has triggered widespread concern. The absence of detailed disclosures has only deepened uncertainty among stakeholders. If concerns had persisted for a prolonged period, questions arise as to why they were not escalated earlier within board processes. Equally troubling are reports that there were attempts to moderate the language of the resignation communication. Any such move, if accurate, runs counter to the principles of transparency and undermines institutional credibility.
The Gensol Engineering episode is a more direct case of alleged governance failure. Instances of fund diversion, questionable invoicing practices and inflated operational reporting point to systemic weaknesses. The key issue here is not merely promoter conduct but the failure of multiple lines of defence — internal controls, auditors and lenders — to detect and act in time. When funds raised or borrowed for specific purposes are diverted without timely detection, it reflects a breakdown in monitoring and accountability frameworks.
The Ola Electric case raises a different but equally significant concern — the end-use of funds raised from public markets. Reports of diversion of IPO proceeds from stated research and development objectives to working capital needs and loss funding raise questions about disclosure integrity and adherence to commitments made to investors. Repeated changes in fund utilisation within a short span weaken trust. At a minimum, such deviations demand clear justification, regulatory scrutiny and, where necessary, corrective action in favour of shareholders.
Corporate governance, at its core, is about transparency, accountability, ethical conduct and delivering on promises made to stakeholders.
Governance weakens the moment these promises are diluted or reinterpreted. Increasingly, lapses are visible in related-party transactions, utilisation of funds, sustainability disclosures, employee conduct and vendor relationships. These are not isolated failures but indicators of deeper systemic stress.
Therefore, the role of independent directors, who are the eyes and ears of the minority shareholders, is much pronounced in such cases of free fall of corporate governance. IDs provide much-needed objective oversight, ethical consequences of decisions, mirroring 360 degree view, ensuring risk management of top order, etc. Unfortunately, given the high incidence of falling corporate governance cases in the last few years — including high-profile companies — the role of IDs is also being questioned.
So, what next? Having learnt the key lessons — lack of transparency or accountability or ownership, weak systems, hunger for short cuts, greed for profits/market valuation etc — it is time we look for ways and means to retrieve our high standards of corporate values. Of course, we do have great examples of high standards of corporate governance demonstrated by several companies in India. But unfortunately, with many examples of corrupt practices, the overall reputation of India Inc is at stake.
Some small, simple steps can make a world of difference.
These include giving more powers to IDs through the Companies Act to deal with key decisions at the Board level, separating the role of chairman, MD, CEO and KMPs (key managerial personnel), ensuring the performance appraisal of the key people is transparent and approved by IDs in Nomination and Remuneration Committee (NRC), strengthening risk management systems in the company, seeking statutory auditors and Internal auditors to submit separate reports on corporate governance to Board at required frequency, encouraging whistle blowers, stringent punishments for KMPs when found wanting in compliance and finally every annual general meeting (AGM) to have a separate session on corporate governance practices where shareholders can raise doubts and questions with MD/CEO to answer them.
It is imperative that the role of regulators — Securities and Exchange Board of India (Sebi), Department of Company Affairs (DCA) and other governing bodies is recast to modern times and built with several digital policing aspects using advanced technology like AI, machine learning etc.
Overall, it is time for a wake-up call for corporates in this world of free fall in corporate governance.
— The author is independent director on select Boards