BharatNotes What is Corporate Governance Principles?
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Its principles seek to align the interests of shareholders, boards, management, employees and society, ensuring that corporate power is exercised with accountability, fairness, transparency and responsibility. For UPSC Ethics (GS4), corporate governance is the institutional expression of integrity and probity in the private sector.
The Global Benchmark: G20/OECD Principles, 2023
The G20/OECD Principles of Corporate Governance are the leading international standard. They were originally adopted in 1999, set out in the OECD Council Recommendation of 8 July 2015, and most recently revised on 8 June 2023, with endorsement by G20 Leaders in September 2023. As of 2023, 53 jurisdictions adhere to them, covering about 95% of global market capitalisation (OECD, 2023).
The 2023 Principles are organised into six chapters:
| Chapter | Focus |
|---|---|
| I | Ensuring the basis for an effective corporate governance framework |
| II | Rights and equitable treatment of shareholders and key ownership functions |
| III | Institutional investors, stock markets and other intermediaries |
| IV | Disclosure and transparency |
| V | The responsibilities of the board |
| VI | Sustainability and resilience (new in 2023) |
The headline change in 2023 was a new chapter on sustainability and resilience, addressing climate-related and other ESG risks, which also absorbed the earlier chapter on the role of stakeholders.
The Indian Framework
India's corporate governance architecture rests on two pillars:
- Companies Act, 2013 — mandates independent directors (Schedule IV Code), board committees, and, under Section 135, Corporate Social Responsibility. Qualifying companies must spend at least 2% of average net profits of the preceding three financial years on CSR.
- SEBI (LODR) Regulations, 2015 — effective 1 December 2015, governs listed entities through norms on board composition, independent directors, audit committees, related-party transactions and disclosures.
Reform was driven by the Uday Kotak Committee, constituted on 2 June 2017, which submitted its report on 5 October 2017 with around 80 recommendations; SEBI accepted a substantial portion and amended LODR in phases from 2018. More recently, SEBI notified amendments on 27 March 2025 extending corporate governance norms (Chapter VA) to High Value Debt Listed Entities.
Significance and the UPSC Angle
Sound corporate governance curbs fraud, protects minority shareholders, attracts investment and embeds ethical conduct. For GS4, the principles connect to core values — transparency, accountability, conflict-of-interest management, whistle-blower protection and stakeholder responsibility. Examiners typically frame this through case studies (e.g., a director facing a conflict between profit and disclosure) rather than direct factual recall. Candidates should be able to apply ethical reasoning and cite institutional safeguards (independent directors, audit committees, CSR) as practical mechanisms that translate ethics into corporate practice.
