Captured Boards and Fractured Governance in a World of Cronyism - The Case of India

This paper examines the largely emasculated role of corporate boards of directors in effectively discharging their fiduciary obligations of promoting and protecting the interests of absentee shareholders. Although legislation and regulation in India, through the Companies Act and Listing covenants especially after their reforms in 2013 and 2014, mandate stiff independence criteria to empower directors to better achieve the desired levels of protection of shareholder and other stakeholder interests, the structural design and composition processes of boards suffer from lethal vulnerabilities that inherently militate against due performance by non-management directors. It also documents the evolution of cronyism over the years, provides a stylised model of up-stream (with government) and down-stream (with directors) business cronyism, and concludes with some suggestions aimed at minimising its adverse impact on board and director independence.