Corporate Governance: An Ancient Scripture Of Modern Governance

Introduction

Corporate governance is a term which is used in very broader sense when it came to company or corporate law. In simple language, the term ‘corporate’ is used for denoting a company or group of company which is defined under section 2(20) of the Companies Act[1]. Whereas the term ‘governance’ means how to govern a particular thing. In addition to both these terms, Corporate Governance basically deals with how to regulate or govern the company. Corporate can be understood as the way in which the enterprises are directed or controlled in order to function properly. This is a combination of rules, processes or the laws by which the business or the companies are operated, regulated or controlled. It creates a system of rules and practices which ultimately responsible for determining the operation of a company.

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Corporate governance is a very broad concept in itself. Its scope includes cultural, social and established institutional aspects which clearly shows how corporate governance encourages the moral, ethical as well as a trustworthy environment in the company. In simpler word, we can say that the heat of corporate governance is accountability, transparency, fairness, responsibility, disclosure, integrity and management of stakeholder etc. An organisation needs a good governance in order to boon it. Initially, there was no legislation on good corporate governance in our country so we use to refer to international committees report for references.For the first time India adopted corporate governance from the Cadbury committee report (U.K). Later on in India, CII Voluntary Code of Corporate Governance (1998)and Kumar Mangalam Birla Committee(1999) pointed on the ‘corporate governance’. Some provisions of Companies Act[2], Regulation 4 of SEBI (LODR) Regulation[3]and few more regulatory frameworks are there which provide guidelines for the corporate governance. This whole corporate world is being governed with the concept of corporate governance which is not a newly evolved concept. Its concept has been derived from the Ancient Indian Scriptures.

Literature Review

In the (Madhavan, 2008), the research focuses on the better alternatives for management which has been pointed out from the relevance of Sri Mad Bhagvad Gita. In the (Raveendranath, 2013, December), he pointed on how during the old days proper administration and management policy takes place and this is how the concept of corporate governance is not new in India. It is derived from the ancient scriptures only. In the (Das, 2008) the concept of CSR was provided in the Arthashastra as an inside-out approach. This study also shows the concept of ensuring the transparency. Ethics, good governance and good ethics. In the (Bhattachaarjee, 2011) he discusses on the teachings of the various Indian scriptures likes Smritis, Shrutis, Ramayana, Mahabharata, Vedas, Gita, Arthshastra etc. and how they are relevant for practising the modern management.

Corporate Governance: A Boon To The Organistion

A corporate governance encompasses both the internal and external factors which will be affecting the interest of a company’s stakeholder, customers, suppliers, management and government regulators. In a Company, the board of director (BoD) is primarily responsible for influencing the corporate governance. The basic principle of a corporate governance are as follows:

• Accountability
• Transparency
• Fairness:
• Responsibility

On one hand, bad corporate governance in any company then such governance will lead to doubt on a company’s operation and its profitability which is ultimately derived from it. On the other hand, good governance helps companies to build a trust with investors and communities. Corporate governance means a company has to focus on the following pointers in order to make the company trustworthy.:

• Substantiable development of all stakeholder: This basically means that there should be development of everyone in a company which includes recognizing the interests of various stakeholder such as employees, customers, suppliers and investors. Furthermore, it is also important to ensure that the concerns of everyone should be there while the decision-making process.
• Effective management and distribution of wealth: Here the wealth includes building, machinery or money related things which is being utilised by the company. all such things shall be managed and maintained properly.
• Discharge of Social responsibility: The stakeholders in the company shall not avoid the responsibility of the company. It will create the company very irresponsible and ultimately create a bad governance on it. For example, some kind of loss happened in the company now everyone is saying this was not my fault, this was someone other’s fault. I am responsible for this. Therefore, discharge of social responsibility is very important in a good corporate governance.
• Application of best management practices: This is all about how nest you give the outcome from the limited input. The management practice will be checked on the basis of the outputs. Making profits rom a very few inputs is what all it means from the application of best management practices.
• Compliance of law in letter and script: following law in the document is very different from following the law in actual. Therefore, it is very important in good governance that the law is not only followed in documents but also it should be followed in actual.
• Adherence to Ethical Standards: Emphasising the importance of following the morals and religious principles in the decision making and actions of a company.

Governance From Indian Scriptures

The concept of corporate governance is not a newly evolved concept. It has some connections with the ancient scriptures. We can say that the concept was already existing in the ancient time which has been clearly seen in the ancient scriptures. So these concepts has been derived from the ancient Indian scriptures. It has been found that all the religious teachings or philosophical writing must contains any of the principle of the corporate governance. In the following Indian scripture, the corporate governance principle has been found:

1. Mahabharata: As advised by the dying Bhishma and other Rishis, the Shanti Parva of the Mahabharata specifies ruler, dharma, and good governance duties. It provides leadership and governance theories. Over 100 chapters of the Shanti Parva discuss healthy administration and monarchy. A prosperous kingdom needs justice and honesty in government. Monarchs and governments must promote pleasure, truth, and morality. Monarchs should live modestly, follow the law, and not abuse their power for personal gain. Rulers must help all things become free, according to the Shanti Parva. Laws that assist all living things without hurting any group are desirable. These ancient Indian philosophies are useful in modern business governance. They remind us that morality and ethics are essential to good governance and company survival.
2. Bhagwad Gita: Lord Krishna outlines the divine treasure in Bhagwad Gita as fearlessness, purity of heart, constancy in knowledge and yoga, charity, self-control, sacrifice, scripture study, austerity, and uprightness. The Bhagavad Gita highlights the significance of responsibility in effective leadership. In the Bhagavad Gita, Lord Krishna urges leaders to fulfil their tasks, stating that doing so is preferable than not doing so. Additionally, one needs effort to sustain their physical body. Lord Krishna emphasised that individuals who do their duties without attachment would achieve the highest objective. By doing their jobs without attachment, leaders establish an example for their followers. Lord Krishna believed that people would follow the leader’s actions and the standards or examples they establish. Effective governance is crucial for teaching the public, and leaders must lead by example. This is crucial for sustained growth, since leaders must follow their own advice.
3. Ramayana: Administration is taught in Ayodhya Kanda chapter two. A long and informative discourse ensues when Rama’s younger brother Bharata begs him to rule Ayodhya in the desert. Bharata governance is taught by Rama. Rama defines ministerial excellence, strategy sessions, administrative temperance, and statecraft justice. Rama’s Bharata and Ayodhya issues teach management. Effective government needs good ministers. Rama suggests Bharata pick bold, capable, strong-willed, and emotionally knowledgeable ministers because government needs effective supervision.Competence and privacy matter. Rama tells Bharata to make difficult choices alone. Core group efficiency counts. Good managers maximise earnings with minimum investment.

Bharata should select a wise man over a thousand fools because knowledgeable individuals can weather recessions, says Rama. If one minister excels, the monarch benefits. Honest, aristocratic leaders are needed for government success. Pay low taxes to stop rioting. Bharata must pay and treat his men on time, Rama says. Delays in pay and benefits may dissuade soldiers, which is bad. Rama advises Bharata to build irrigation infrastructure to lessen rainfall reliance and boost commerce and agriculture. Safety and speedy dispute resolution are trader priorities. Good governance preserves forests and wildlife. Indeed, Ramayana vision lasts. Law, justice, money, business, corruption, profiting from innocents, and wrongdoing. Modern and old, Rama’s advice to Bharata is vital. Rama advised Bharata on government to come.

4. Arthashastra: This Arthashastra includes Kautilya’s statecraft, economics, and military tactics. Chandragupta Maurya, who founded the Mauryan Empire, trained and sheltered Takshashila scholar Chanakya. Athashastra is massive and political. Government, law, civil and criminal courts, ethics, economy, commerce, minister screening, diplomacy, war theories, peace, and king obligations are examined. This system runs enterprises and the board control’s firm structure. The Kautilya’sArthashastra and corporate governance have many parallels. Arthashastra makes all authoritiesincluding the monarch, public servants for effective administration. Accountable, removable, and recallable monarchs stabilise. Lack of it causes instability. These ideas remain relevant and defined royal duties. According to Arthashastras, the Duties of a king are as follows:
5. Raksha:It means to safeguard or protect. We all know protection means avoiding harm. The king must protect his people. Like Raksha, the CEO or Board of Directors (King) protects shareholder interests in corporate governance.Corporate governance also links Raksha to risk management. As part of a risk management plan or policy, the board, audit committee, and top management must identify, minimise, and optimise risks.
6. Vriddhi: It literally implies growth and progress. The monarch is responsible for providing resources and facilities to enhance the nation and promote progress. Today, Vriddhi responsibility aligns with shareholder value development. The goal of every company is to maximise earnings and riches. Efficient corporate governance improves this. Effective management and motivation lead to long-term success and growth. Good corporate governance standards may lead to firm development, diversification, and takeovers by enhancing goodwill, corporate image, and reputation in the competitive market.

• Palana: Maintaining/complying. Today, it implies following national laws. Our corporate governance practices significantly execute Palana’s commitment. SEBI’s corporate governance regulations need compliance. Companies must get an auditor’s certificate of corporate governance compliance. This certificate is related to the director’s report and distributed yearly to shareholders and stock exchanges with returns.

1. Yogakshema: Kautilya’s Arthashastra uses welfare to indicate social security. Corporate social responsibility is its present relationship. Yogakshema demands the king to protect the people.Monarchs prioritise people’s well-being. Companies understand that society affects everything from land acquisition to manufacturing. They feel alone in society. Business success depends on social prosperity since society uses goods and services. An organisation must increase its members’ economic well-being. Corporate Social Responsibility is important.

There are four pillars of corporate governance, i.e, fairness, transparency, accountability and responsibility. The relationship between the duty of a king given under the Kautilya’s Arthashastra and the principle of corporate governance are like Raksha is the principle of responsibility in modern times, Vriddhi is the accountability, Palana is the transparency and Yoga kshema is the fairness of the corporate governance.

Conclusion

Corporate governance is a methodical strategy to ensure that the business is managed in a way that prioritises the best interests of all stakeholders. The allocation of roles and obligations to directors is done to manage corporate affairs. This concerns the role of the person in charge of managing and directing the organisation, as well as many qualities such as ideals, virtues, and ethical standards. The primary emphasis is on fostering transparency, integrity, and accountability within the management. The objective of this study is to ascertain the influence of the ancient Indian scripture Arthashastra on the corporate governance framework in India. The study provides irrefutable evidence that supports the use of several components of Arthashastra in the establishment of an Indian Corporate governance framework. The study findings suggest that religious and ancient writings have a substantial impact not only on corporate governance but also on the worldwide development of various management principles. The study also noted that the selected book, Arthashastra, has an impact on the progress of other areas of corporate administration, including human resource management and strategic management.

Author: Sakshi Sinha, A Student at Symbiosis Law School, Co-Author: Aashish Negi Senior Associate at Khurana and khurana, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing

Bibliography/ Refernces:

• Bhattachaarjee, A. (2011). Modern Management Through ancient Wisdom. SNS.
• Cadbury committee report 1992
• Companies Act 2013
• Charles Valdaue, W. J. (1996,). Kautilya Arthasahstra: A Neglected Precursor to Classical
• CII Voluntary Code of Corporate Governance (1998)
• Indian Economic Review, XXXI, No.1, 101-108.
• Fernanado, A. (2012). Business Ethics and Corporate Governance. Chennai: Doring

Kindersley (India) Pvt Ltd.

• Das, B. M. (2008). CSR: A Philosophical approach from an Indian Perspective. International journal Indian culture & Business Management.
• Kumar Mangalam Birla Committee (1999)
• Madhavan, A. (2008, December). Management Lessons from Bhagavath Gita. The vedantha Kesari.
• Raveendranath, M. C. (2013, December). Corporate Governance – its origin in Ancient India. DRIEMS BUSINESS REVIEW.
• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, reg. 4.(as amended)

[1] Companies Act 2013, s.2(20).

[2]Companies Act 2013.

[3]Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, reg. 4.