Corporate Governance and Shareholder Activism in India—Theoretical Perspective

Iragavarapu Sridhar

doi:10.4236/tel.2016.64077

Abstract

The origin of division of powers between Board of Directors and Shareholders has been subject of different judicial interpretations. Company law is a standard federal law. Hence, it envisages a clear division of powers between Shareholders and Board of Directors. The purpose of this paper is to analyse the methods and role envisaged for shareholders in corporate governance, given the little incentives and limited means available to them to perform any supervisory function over Board of Directors. The study reports, that it is difficult to tie down any definite role for investors in corporate governance. Corporate governance ought to shift from being a procedural requirement when it comes to addressing the issue of shareholder activism. An implication of the study is to put emphasis for enforcement of shareholder rights through civil proceedings. This can be achieved by introducing substantive provisions codifying duty of care, fiduciary role-playing requirements for Board of Directors.

Highlights

A company is itself a legal person, with an existence independent of that of its members
The company acts through its board of directors and the general meetings [1], which constitute the “organs of the company” and between them exercise all of its powers and functions [2]
The question as to who controls the company between the board of directors and the general meetings has been a source of controversy in various judicial interpretations since the nineteenth century

Summary

Introduction

A company is itself a legal person, with an existence independent of that of its members. The company acts through its board of directors and the general meetings [1], which constitute the “organs of the company” and between them exercise all of its powers and functions [2]. The question as to who controls the company between the board of directors and the general meetings has been a source of controversy in various judicial interpretations since the nineteenth century. The partnership view of company law regarded shareholders as owning and controlling the company and appointing the Board of Directors as a matter of convenience since they cannot manage the company themselves. Directors were regarded as acting on behalf of the. (2016) Corporate Governance and Shareholder Activism in India—Theoretical Perspective.

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