Companies Bill, 2011 As a Wakeup Response for Corporate Misgovernance and Scandals in Indian Corporate Sector

Abstract

Corporate Governance is concerned with holding the balance between economic and social goals and between individuals and communal goals. The corporate governance. framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. Corporate governance is the key of corporate excellence. It extends beyond good corporate performance and financial propriety. Its essence has been considered after experiencing a crucial phase of corporate crises during 1970-1990, which include scam and scandals in developed countries like U.S.A., U.K. etc. As a wake up response to major financial scam and corporate failures, need to tighten surveillance over corporate framework and behaviour was realised. Effort articulating standards for corporate governance took its root in U .K. and U.S.A as early as in 90's and later to other countries also. The Foreign Corrupt Practices Act, 1977 (USA), OECD Principles of Corporate Governance (1999 and 2004), Sarbanes-Oxley (SOX) Act, 2002 (USA) and UNCTAD Guidince on Good Practices in Corporate Governance Disclosure, 2008 (UK) are some of the initial steps taken toward~ the corporate governance. Corporate governance has also been under constant scrutiny as an issue that has gained widespread importance in Indian scenario. Its significance was realised after experiencing the Harshad Mehta stock scam during 1992. Which lead to various initiatives in the form of guidelines, in order to strengthen corporate governance by ensuring transparency and responsible Board structure. 'Desirable Code on Corporate Governance' initiated by CII in 1998 was one of the first initiative in this direction. Subsequently, scam in Satyam Software Services Ltd. during 2009 made a dent on prevailing statutory provisions of Companies Act, 1956 and lead to fill gaps by strengthening existing Companies Act. New Companies Bill, 2011, which has been introduced in Lok Sabha is being treated as a wakeup response for corporate ri1isgovemance and scandals in Indian corporate sector.