Corporate Governance

Corporate Governance and CSR in India: Principles, Ethical Issues, Case Studies & Measures for Responsible Business

Corporate governance refers to the system of rules, practices, values, and processes by which companies are directed and controlled.

Components of Corporate Governance: 

Keywords	Examples
1. Transparency	Infosys’ policy of quarterly transparent disclosures and whistleblower protection enhanced investor confidence.
2. Accountability	Satyam Scam (2009) exposed weak accountability → Led to SEBI reforms and Clause 49 of the Listing Agreement, strengthening board oversight.
3. Fairness & Equity	Tata Group ensured fairness during mergers by safeguarding minority shareholders’ interests (e.g., Tata-Corus deal transparency).
4. Ethical Leadership	Ratan Tata’s ethical stand of refusing to bribe for setting up an airline venture in the 1990s reflects ethical leadership.
5. Corporate Social Responsibility (CSR)	ITC’s e-Choupal project empowered farmers with information and better prices, aligning profit with social good.
6. Integrity & Compliance	Wipro’s “Spirit of Wipro” code emphasises integrity over short-term profits.
7. Stakeholder Orientation	Hindustan Unilever’s “Project Shakti” supported rural women entrepreneurs, benefitting the community and business alike.
8. Sustainability	Reliance Industries’ investments in renewable energy and green hydrogen align with ethical sustainability in business.

Ethical Issues in Corporate Governance:

Keyword	Examples
1. Transparency Deficit	Enron scandal (2001) – falsified accounts misled investors.
2. Conflict of Interest	Satyam Scam (2009) – promoters manipulated accounts for self-interest.
3. Insider Trading	Harshad Mehta Scam (1992) – exploited systemic loopholes.
4. Crony Capitalism	2G spectrum allocation case → corruption & loss of public trust.
5. Exploitation of Stakeholders	IL&FS crisis (2018) – mismanagement affected investors and public funds.
6. Excessive Executive Compensation	Debates around CEO salaries in the Indian IT sector, despite layoffs.
7. Neglect of CSR & Sustainability	Bhopal Gas Tragedy (1984) – poor safety culture led to a mass disaster.

Measures to Ensure Effective Corporate Governance:

Keyword	Examples
1. Mandatory disclosure norms	Strengthening SEBI rules, independent audits, and quarterly reports.
2. Strong board oversight	Independent directors, separation of the CEO & Chairman roles.
3. Ethical codes of conduct	Adoption of corporate ethics charters like “Spirit of Wipro”.
4. Secure reporting mechanisms	Legal safeguards (Companies Act 2013, SEBI regulations).
5. Inclusive decision-making	Fair treatment of minority shareholders, consumer protection.
6. Enforce social responsibility	Mandatory 2% CSR under the Companies Act 2013.
7. Strengthened institutions	Role of SEBI, CAG, and Competition Commission to prevent unethical practices.
8. Value-based leadership	Leaders like Ratan Tata & Narayana Murthy model a trust-building culture.

“Management is doing things right; leadership is doing the right things.”- Peter Drucker

Ethical corporate governance requires more than compliance with laws – it demands a value-based approach where profit is balanced with responsibility.

Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) in India reflects the ethical obligation of businesses to contribute to societal welfare. Legally mandated under the Companies Act, 2013, it ensures firms balance profit-making with sustainability, equity, and inclusive development through responsible practices.

Ethical Perspective of CSR:

Keyword	Examples
1. Moral Responsibility Beyond Profit	Maruti Suzuki’s Driver Training Schools across India enhance road safety and employability.
2. Justice and Fairness	Vedanta’s Nand Ghar Project provides nutrition, healthcare, and digital education to rural women and children.
3. Sustainability & Intergenerational Ethics	JSW Energy’s wind and solar initiatives promote green power and reduce carbon footprint.
4. Human Dignity and Social Upliftment	Adani Foundation’s Skill Development Programs for rural youth and women entrepreneurs.
5. Compassion & Gandhian Trusteeship	Larsen & Toubro’s Water and Sanitation projects in rural areas ensure dignity and hygiene.
6. Nation-Building as Ethical Duty	Bharti Foundation’s Satya Bharti Schools provide free quality education to rural children, aligning with SDG-4 (Quality Education).

Ethical Issues in CSR:

Keyword	Example
1. Tokenism / Superficial CSR	Some companies only donate to PM-CARES without long-term community engagement.
2. Misuse of CSR Funds	Reports of NGOs linked to corporate houses siphoning CSR allocations.
3. Greenwashing	Firms claiming “carbon neutrality” while continuing polluting practices.
4. Conflict of Interest	Real estate companies are building “CSR schools” in their own township projects.
5. Lack of Transparency & Accountability	MCA reports highlight gaps in CSR disclosures, especially among mid-sized firms.
6. Short-termism	One-time donation drives vs. capacity-building programs (e.g., skill development).

CSR in India must extend beyond legal compliance to encompass ethical responsibility, sustainability, and trusteeship. Genuine CSR can bridge social gaps and strengthen nation-building.