Published On: November 3rd 2025
Authored By: Arjit Pasayat
CMP DEGREE COLLEGE PRAYAGRAJ UOA
What is corporate governance
Wheather it be government people of company everything needs to be in order to achieve thgoals which it has postuated simply meaing there must be a set of rules and an agency to enforce them. In corporation such governannce, which becomes a key to the success of the company is called the corporate governnance
Corporate governance sets the guideline for how a company operates. Its mechanism which ensures transaparency, fairness and set accountability among Variou stakeholders like member shareholders and employee, the part of governance who works in a set of hierarchy and procedure. In simple this concept simply means tow things first how the company is governed or run and who are responsible for the companie’s business etc. and second what are procudure, law and regulation.
Need for the corporate governance
To refrain compamioes from doing to their mind which may affetc th general public the concept of corporate governnance is brought whwrein the company shall run in a manner and hierarchy with being accountable to the government and investors. Ther are various reason for why there s need for the governnace of the company such as imagine a scenario here was a company established and labours are working to what are they paid but there is no one to tell them what to do, their salary is not fixed, the goods is not monitored no one is acccountable to no one evryone is doing their minds, what shall be of this company? It’ll sink as fast as boat with hole, so is the situaton when there is no proer set of governnace whatso ever be the strategybut in lack of proper system it will fail. So the corporate governnace makes companies more accountable, fixes rule breaking , protect the investors,set up good management practices strngthen a companies finannce etc.
Objective of the corporate governnace
There are three main objective of the corporate governnace every corporation must follow in its management policy and framwork
- Fairness
- Transparency
- Accountability
These are considerd as the pillars of the corporate governnance which makes any corporation a success. The board of directors must maintain the fairness among th sharehplders employees and vendors along with ensuring the trasaparency with them.[1]
Structure of corporate governance
The companies is not governed by a person or two but with a defined structure that show the flow of power among the mebers of the company. There are various entity who are resposible for the governnace of the copany such as shareholder board of directors manager and employees etc as they are the primarily part of institution but various non instititutional(apart from company) bodys like government auditors and advisors are also included in the governing of the company.but the major responsibilty to implement the governnance lies with the board of directors as they are considered the brain of the company. The BOD are burdened with the primal responsibility of implementing the rules and regulation of the company and also comply with the procedure as envisioned in MoA and AoA. Apart from BOD there are various other entity which are the part of governance are following[2]
Shareholders–
They are the owners of he company as they invest it in it but their role in the governnace of the company is not very regular meaning they have limited role. The shareholder are assignrd with making laws and regulation for the company in the meetings(AGM or EGM) held which enables them to look into the legal as well procedural aspect of managemnet of the company. The board f dirctors are elected by these shareholder have right to asssess the actions of directors and may repudiate it if inconsisitent with the company’s policy and law.
Board of directors
considered as the brain of the company, for every action of a company is taken by them wheather for businrss of for internal managemnt, the Board of directors is the apex body in any compnay wherein the directors take their part who have ben eleted by shareholder and together makes a governing body that supervises the activities of the business or any agency.[3]
The board of directors is resonsible for every actio of th compnay and decision must be takn by the majoriy of them. The primary duty includes aying down broad policies for smooth governance of the company, appointing and removing to various manegerial positions, accounting to the shareholders setting up salaiea aand approving the annual budget are the main roal of this body which gives it the status of being synonymous to the term “corporate governannce”
Managers-
Managers are the 2ns tier officers of company whose roleis to make decision regarding growth o company lay down strategic plans, oversee and lead the work based on the positions. Thre are around various level of m/anagers but for ease we will be looking main 3 of them which are
- Top tier such as CEO CFO and managing directors etc.
- Middle level manager departmental head
- Front line managers as entry level position
Overall the task of managerial post is tto formulate policies and layon strategic builidng and to work on that policies to bringthem into the existene. The corporate governnace is very much relied on these manageers.[4]
Employee –
These are the person who actually perform the task and policy which the higher bodies have formulated. A company relies on these employees as they are the last to the hierarchy of strucuture in a company but very first in line.
Overall the above mentioned entity are corporate governance as the term simply means how a corporations is governed or managed and who are they done by but its not only them who are part of governance but ther are various other bodies who are not associatd or employed in the company yet plays a crucial role in the governnance of company or corporate such as government and external auditors and banks etc. various bodies of governemnet are specificall creatd in order to look i2nto the company and its policy such as ministry of corporate affairs, SEBI (stock and exchange board of india registrar of company, and company law tribunals etc. apart from bodies the state has also enacted various law to regulate the business these are companies act 2013, companies rule 2014 etc.
Role of government in the corporate governance
The government plays a very crucial role in the governance of a corporation as it lays down the basic feature as it addressess the the issues of accountability and fiduciary duty as important aspects of Corporate Governance essentially advocating the implementation of guidelines and Board level mechanisms to protect the interest of shareholders. The inclusion of state in the governnace makes the company accountable and responsible towards the state as well its investors, also acting as a shield from the various corporate fraud like insider betting, fraud, embezzlement and environmental fraud etc. the state takes part in the governnace either directly(investment or ownership) or indirectly(legislation or rule or regualtion) to enable fairness transparency and accountability. The primary motive behind the state interference is no to own the business but to protect the general public from any unlike event which may lead to the harm for them as well the country.there are various machinary of state which regulates and monitors the business along with ensuring the compliance with public policy and existing legal system in the country such as india has MCA(minstry of corporate affairs), SEBI(security and exchange board of india),SFIO(serious fraud investigation office), RBI(researve bank of india),and NCLT (national company law tribunal) etc. functioning as checks on the immoral and unlawful action of the company promoting a smooth trasnaction of business. Aprt from bodies and institution the state has also enacted several laws which works as a control of government over the corporation, such laws are the Company act 2013, Company rules 2014 and SEBI rules etc.
The concept of lessezz fire seems to be violated when a state starts intefearing in the business but the inclusion is very much necessity for the people of india cause there has been various cases which have very timidly compelled the state to make an interference in the business transaction such as chiranjeet law chaudary case[5] where in thee court accpted the state interference valid in the matter and upheld the constitutional validity of sholapur sewing and weaving company act 1950 which took full control of the company, and satyam computer scandal[6] where this showed the need for strict laws to restrict such a big scam whoch shook the whole nation.
Conclusion
Any successful corporation depends on corporate governance as its fundamental structure which enables transparency and fairness and accountability. The framework of corporate governance through defined rules and hierarchies and responsibilities unites shareholder interests with those of board members and managers and employees and external stakeholders who include government entities and auditors. The three core principles of fairness and transparency and accountability work together to build trust while protecting businesses from unethical conduct and poor management. The Ministry of Corporate Affairs and SEBI work with the Companies Act 2013 to maintain corporate responsibility which safeguards investors and public interests. Sustainable growth and financial stability and public trust in corporate operations depend on strong corporate governance practices.
References
[1] James chen, corporate governance: definition, principles models and examples, Investopedia(09/09/2025) Corporate Governance: Definition, Principles, Models, and Examples
[2] Warganegara, D. S., Mohamed, N., & Bujang, I. (2023). Regulatory Settings and Corporate Governance of Indonesia’s Two-Tier Board System. In J. Said, D. Daud, N. Erum, N. B. Zakaria, S. Zolkaflil, & N. Yahya (Eds.), Building a Sustainable Future: Fostering Synergy Between Technology, Business and Humanity, vol 131. European Proceedings of Social and Behavioural Sciences (pp. 823-836). European Publisher. https://doi.org/10.15405/epsbs.2023.11.68
[3] Board of directors, wikipedea(09/09/2025) Who is a manager? What are the roles and responsibilities of a manager? – Apptivo
[4] Who is a manager? What are the roles and responsibilities of a manager?, Apptivo(9/10/2025), Who is a manager? What are the roles and responsibilities of a manager? – Apptivo
[5] Chiranjit lal chaudhary vs the union of India and others, 1951 AIR 41(india)
[6] Ledella ravichandar v. Satyam computers service limited, city civil court appeal no. 259 of 2002
