Strengthening corporate governance: Creating a resilient and robust business environment in India

MCG Global’s survey on corporate governance in India underscores the necessity for enhancements in adherence to good governance.

Corporate governance refers to the set of rules, policies, and practices that companies follow to ensure accountability, transparency, and ethical behavior. In recent years, corporate governance has become increasingly important for businesses in India, as it is a key factor in ensuring long-term sustainability and growth. Against this backdrop, a recent survey by risk advisory firm MCG Global sheds light on the current state of corporate governance in India and highlights the need for continuous improvement in this crucial area.

Key findings of the state of corporate governance in India, 2023 survey by MCG Global

The survey addresses critical questions surrounding the compliance of India’s largest corporations with corporate governance regulations. It explores whether the corporate leadership in India can be trusted to prioritize the interests of shareholders and foster long-term growth for the company. According to the survey that reached out to over 60,000 professionals in corporate governance, management and board-level roles in various sectors across India, nearly 67 per cent of private companies lack an adequate risk management function, and over 52 per cent lack formal risk management processes. The survey participants represent companies reporting revenues of over Rs 1,000 crore. These findings reveal a significant gap in risk management practices among Indian private companies.

The survey also highlights the need for continuous improvement in corporate governance practices in India. Despite growing awareness and emphasis on corporate governance, it indicates that there is still room for improvement in adherence to good governance practices among Indian companies. Understanding the benefits of corporate governance can further highlight the critical need for its continuous improvement in Indian companies.

Benefits of corporate governance

Increased transparency 

One of the main benefits of strong corporate governance is increased transparency. Companies that prioritize transparency provide stakeholders with access to information, ensuring that they know the company’s operations, financial performance, and risks. This information allows stakeholders to make informed decisions, which in turn can build trust and credibility for the company. 

Enhanced accountability 

Corporate governance also ensures that companies are accountable for their actions. With clear guidelines and policies in place, companies can be held responsible for their decisions and actions, which can help prevent unethical behavior and promote ethical business practices. This accountability also allows companies to maintain a positive reputation and build trust with stakeholders. 

Ethical business practices 

Corporate governance policies and practices also help ensure ethical business practices. By prioritizing ethical behavior, companies can create a culture of integrity, which can positively impact employee morale, customer loyalty, and investor confidence. This culture of integrity can also help companies to avoid legal and reputational risks associated with unethical behavior. 

Conclusion

In conclusion, the survey findings and analysis make it clear that corporate governance is becoming increasingly important for businesses in India. Adhering to good governance practices can have a positive impact not only on the individual companies but also on the overall economy. The need for continuous improvement in corporate governance practices is crucial to ensure that Indian companies can compete on a global level and attract investment. Therefore, it is high time that Indian companies prioritize corporate governance to ensure sustainable business growth and contribute to the country’s overall economic development.

Written by Prashant Gupta, Founder & CEO, Caerus3Advisors