In this age of Globalisation, where economic motives precede over all virtues and traditions, protection of larger public interest from great corporate scandals has become matter of great importance. The valiant attempt in this regard was made by the Confederation of Indian Industries by coming up with the voluntary set of guidelines on Corporate Governance, subsequently adopted by SEBI through its Listing Agreement. The Whistle-blower policy in this regard has been recognized as one of the basic features of Corporate Governance Norms by most of the nations across the world. However due to the lobbying of the Indian Corporations, the Whistle-blower policy, despite being a mandatory recommendation in the Murthy Committee Report, was diluted and made non mandatory provision under the Clause 49. The passage deals with legal implications of this dilution and identifies the origin and legislative development of the policy and its need in the present corporate world. The present times need standards of corporate governance more than ever for despite the dominance of organizational actors in contemporary social life, law is desperately short of doctrines, institutions, and regulatory techniques that adequately control corporate entities. It has now become imperative to design and implement a dynamic mechanism of corporate governance, which protects the interests of relevant stakeholders without hindering the growth of enterprises because the corporate veil frequently deflects the penetration of legal values into and, indeed, the imposition of legal sanctions upon the corporate entity. Adversarial-trained lawyers often facilitate avoidance and evasion of corporate liability through ‘creative compliance’ with legal requirements. A commonly proffered solution to the problem of ensuring that legal values permeate the internal workings of the corporation is to require large institutions to regulate themselves in a way that is responsive to social concerns. On the other hand, it has not been an argument against corporate governance that not all well governed companies do well in the marketplace nor do the badly governed ones always sink. Counter to that is the fact that modern day corporations raise capital through investment by stakeholders whose interests are to be protected by the company management. Corporate governance is thus ‘concerned with ways of bringing the interests of investors and manager into line and ensuring that firms are run for the benefit of investors.
1. Which of the following options best summarizes the stance/position taken by the author in the passage?
a. Corporate Governance is important with further enhancement in modern day technology and management principles
b. Stringency in norms to govern corporations will have to be placed to guard all the relevant stakeholders
c. Since capital raised from various stakeholders, their interests are of highest importance
d. Social Concerns are the main way and most effective way to instil ethics in corporate governance.
2. Why does the present times need corporate governance more than ever according to the author?
a. Because now is the time, the corporate raking in very high profits and have very high margins
b. Corporate scandals are now very rampant and the increase in white collar crimes justifies the need to govern the corporate more now
c. Funds are now borrowed from various stakeholders in the society and their protection is of foremost importance
d. The current framework is very inefficient in dispensing justice in matters of corporate governance to protect the interest of all stakeholders
3. Why is there a dire need to design a new mechanism for protection of stakeholders as per the passage?
a. Corporate look very law abiding and ethical from the exteriors, but they tend to side-track legal penetration
b. The laws are complex, and they have to be enforced by more efficient and organised control
c. The existing laws govern the corporate on issues which generally is complied with by most corporations
d. Public investment and its safety calls for mechanisms which can guarantee safe return
4. How do the legal systems affect the actions of lawyers and attorneys in the field of corporate governance?
a. They use the complexity in the laws to ensure their clients’ safety by finding loopholes
b. They derive new ideas through which they ensure the corporations can continue with the business
c. They work to building harmony with the laws and scrutinize the legal structure of the corporate in unison with it
d. They deceive the lawmakers by circumventing the law
5. What could be the reasoning behind corporations taking to lobbying against implementation of stringent legal principles on corporate governance?
a. Corporate Governance affects competition
b. Corporate Governance affects quality
c. Corporate Governance affects profitability
d. Corporate Governance affects longevity
6. What is the author’s counter reasoning towards corporation lobbying against rigorous corporate governance norms?
a. Author appeals to the facts that corporations are vital for the growth of society and hence must be law abiding
b. Author appeals that competitive and ethics must be balanced
c. Author appeals that stakeholders must be protected at all costs
d. Author appeals that circumventing the law is equal to breaking the law
7. What is the tone of the author when he discusses the entry of Clause 49 in the Murthy Committee report?
a. Praise and Pleasure
b. Anguish and Vexation
c. Indifference
d. Anger
Correct Answers:
1. Option – b Stringency in norms to govern corporations will have to be placed to guard all the relevant stakeholders.
2. Option – d The current framework is very inefficient in dispensing justice in matters of corporate governance to protect the interest of all stakeholders.
3. Option – a
4. Option – b
5. Option – c
6. Option – c Author appeals that stakeholders must be protected at all costs.
7. Option – b
