The commercial landscape and how organizations run have both changed significantly as a result of the past two years’ events. Our knowledge of issues with public health has grown as a result of the COVID-19 pandemic. Now more than ever, the climate problem equally demands quick action. In addition to these, several other factors also contribute to the way reputed organizations function these days. 

Given such a situation, let us explore the emerging trends in corporate governance that will help you prepare for the challenges and opportunities you might encounter in your corporate journey. 

In general, corporate governance seeks to maintain the integrity and respectability of markets, financial institutions, and enterprises in order to protect social and economic growth. Read this blog to have a better understanding of the same. 

An overall view of the Corporate Governance

A business’s system of rules, practices, and processes that govern and exercise control over it is referred to as corporate governance. In general, this form of governance generally entails striking a balance between the needs of all of a company’s various stakeholders, including shareholders, senior management, clients, suppliers, financiers, the government, and the local community. 

The following points describe some of the elements that highlight the significance of this governance:

• The increased importance of corporate social responsibility: Corporate social responsibility is given a lot of weight in the contemporary environment. Businesses benefit greatly from society, but society also has some expectations of them. And corporate social responsibility refers to the obligation of businesses to meet these expectations. For fulfilling its social responsibility, the board must defend the interests of all parties involved, including local communities, shareholders, employees, and shareholders. They require corporate governance to satisfy all of these obligations.

• Shareholder inactivity: Shareholders only show up at their firms’ annual general meetings. They rarely participate in management, and the associations of shareholders are likewise weak. Directors frequently profit from this circumstance and abuse their authority. Therefore, corporate governance is essential to safeguarding the interests of all company stakeholders.

• Increased commercial corruption: In recent years, numerous frauds, scams, and corrupt activities have been exposed. Public funds are being misused and misappropriated on a wide scale in the stock market, banks, financial institutions, businesses, and government agencies. Corporate governance is a practice that many businesses have adopted to prevent these financial problems.

• Increasingly globalized economy: The majority of large corporations today sell their products on the international market. They must draw in overseas investors and customers to survive and expand, and they must also abide by foreign laws and regulations. Corporate governance is necessary for all of this. It is hard to enter and survive in the global market without this governance. 

Have a glimpse at some of the popular recent trends in Indian corporate governance

There are multiple trends regarding this system of governance, some of which are described below: 

• Change in Board Sizes and Age: For strategic appointments, increased diversity, and specialization as businesses aim to restructure and grow in the post-Covid era, enterprises at the minimal regulatory level (6 board members) are anticipated to raise their board size by 1-2 numbers. It is anticipated that those boards with previously bigger board sizes will reduce the size to improve and harmonize board processes, ideas, and leadership. It is conceivable that we will see a relatively “younger demographic” in the boardroom when the next generation of business leaders assumes control.

• Greater Gender Diversity: The drive to increase gender diversity in Indian boardrooms has been spearheaded by large publicly traded firms. Smaller and mid-sized businesses are anticipated to follow in their footsteps. According to a study by one of the well-known companies, “Deloitte,” a country like India saw a growth in the number of women taking up CEO posts, with 4.7 percent of female CEOs, compared to “3.4 percent reported in 2018”. The survey also discovered that India’s “stretch factor” grew slightly from 1.22 (in 2018) to 1.30 (in 2021), and that “the average tenure of women directors increased slightly from 5.0 years in 2018 to 5.1 years in 2021.” To achieve more gender diversity as more women take up leadership positions, strategies such as succession planning, stewardship, stakeholder pressure, and training will be required. Moreover, Indian boardrooms have realized the need of selecting female directors based on their qualifications.

• More Non-Executive Board Chairs: Even if the mandate has not been accepted under the Indian regulatory framework when Indian enterprises expand internationally, they are more likely to embrace stronger and enhanced corporate governance best practices. As executive leadership (particularly in family-owned businesses) rests at the vice-chair level, non-executive board chairs are being chosen more frequently to serve as stewards of boards, company, and governance leadership.

• More Independent Directors (ID) in the Boardroom: As boards seek to improve their composition, it is likely that more Independent Directors will be nominated, particularly those with domain leadership and experience, for meeting the strategic needs of businesses. New independent directors will join the boardroom from the fields of sustainability, emerging technologies, and digital transformation, as well as from the fields of human resources and regulation. A trend for new board committees, such as the ESG Committee, Digital Transformation/ Technology Committee, etc is also likely to result from this. In addition, Indian boards are adopting a global trend of appointing Lead Independent Directors to more Boards, and this practice is anticipated to become more widespread in the years to come.

• Separation of Board Chair and Managing Director/ CEO Roles: Based on facts, the Indian market regulator SEBI has now changed the listing requirements for companies listed on the Indian bourses for the separation of such posts from mandatory to voluntary on February 15, 2022, the globally competitive, large Indian companies are now adopting this practice more frequently to ensure good governance, with a view to sustained long-term, global growth of their businesses. However, given that many of the biggest Indian corporate groups are family-owned, this will proceed at a glacial pace.

• Hybrid and virtual board of working: Organizations use online and hybrid meetings because they reduce travel and related costs, boost participation, and let the board cast a broader net to locate the best new talent to join their team. Online board meetings reduce the need for fossil fuels and make it possible for a more diverse corporate board because there are fewer barriers to attending.

For a better understanding of the above-mentioned and other trends, it is advisable to connect with the best lawyer in Chandigarh, who can provide you an in-depth knowledge and services related to any sort of corporate conflict.

Where to find trusted and best corporate lawyers in Chandigarh?

In case you are searching for a reputed law firm in India, Lex Solutions can be your one-stop solution. It is a top-tier law practice that employs Chandigarh lawyers that are extremely learned and experienced. The firm frequently offers cutting-edge, practical, and long-term legal solutions to its domestic and foreign clients, which also include several government agencies, corporations, public sector units (PSUs), businesses, high-net-worth individuals (HNI), educational institutions, non-banking financial companies, financial institutions, etc.

While facing any issues in reaching out to the best corporate lawyers Chandigarh, you can contact them to avail of their excellent services. All the contact details and required information are available on their website.

Summing up

One of the foundational elements of any successful company is corporate governance. While this system may not be the primary driver of economic growth, it is crucial to the organization’s efficient operation. Therefore, the board of directors of an organization should hold regular meetings, maintain control over the company, and have clearly defined roles as a result of this system of governance.  

FAQs

1. Which are the different services offered by Lexsolution? 

Corporate Litigation, Matrimonial Disputes, Real Estate/ Land Related Disputes, Writ Work, White Collar Crimes, Bankruptcy and Insolvency, Banking and Finance, Intellectual Property, Criminal Matters, Election Related Disputes, Service Matters, Dispute Resolution, Adoption, Electricity Laws, Public Interest Litigation, Energy and Natural Resources include some of their services. 

2. What are the seven corporate governance pillars?

Accountability, equity, transparency, assurance, leadership, and stakeholder management are the foundational elements of good corporate governance.

3. What negative effects may be there from poor corporate governance?

Corruption, carelessness, fraud, and a lack of accountability are just a few problems that can arise from poor corporate governance. 

4. What are the fees for corporate lawyers in India?

Lawyers with significant years of experience charge up to INR 5–10 lakhs for every appearance, whereas recent graduates charge about INR 300–400 per appearance. A corporate lawyer, on the other hand, is paid a fixed rate of INR 6- 12 LPA. In a country like India, corporate lawyers in Chandigarh can offer you the appropriate services you are looking for. 

5. Which organizations displayed bad corporate governance in the past?

A number of prominent companies, including Enron, Satyam, Cadbury, Wal-Mart, and Xerox, were negatively impacted by poor corporate governance.