Corporate Governance, a concept relatively unknown about two decades ago has now become the most commonly used phrase in the current global business vocabulary. It’s a hot topic across the globe, these days, and in India. The concept gained prominence in the late 80’s and early 90’s when the corporate sector, in a number of countries, was surrounded with problems of questionable corporate policies or unethical practices highlighted through the well-known scams/scandals like Enron, WorldCom, (USA) or Tyco (Ireland). In India Corporate Governance became the most talked about subject after the collapse of Satyam in 2008. Through this article an attempt has been made to explore the concept of Corporate governance found in our ancient Indian Scriptures. In the Indian context the origin of corporate governance can be traced from different ancient scriptures namely the Ramayana, the Mahabharata, and the Vedas.
In layman’s language the term governance can be quoted as “the process of decision-making and the process by which decisions are implemented (or not implemented).” Governance can be used in several contexts such as corporate governance, international governance, national governance and local governance. An analysis of governance focuses on the formal and informal factors involved in decision-making and implementation of decisions made and the formal and informal structures that have been set in place to make and implement the decision. Good governance, for ages, has always been the idea of political thinkers, policy planners, decision-makers and the academics. For any society the emotional well-being of citizens largely depends upon the goodness of the government. For this the systems and sub-systems of governance must be essentially efficient, effective, economical, ethical and equitable. To achieve these qualities of good governance, the machinery of governance must also be accountable and responsible. The recent example of this is the new coronavirus pandemic which is not only wreaking destruction on public health and the global economy but disrupting democracy and governance worldwide. Already, some governments have used the pandemic to expand executive power and restrict individual rights. Yet such actions are just the tip of the iceberg.
Corporate governance in India
The term corporate governance is not of recent origin. However, it gained importance and momentum since the early nineties in the western part of the world. In India the concept got importance after the introduction of voluntary code by the confederation of Indian Industry. A total revamp of our economy was done by the introduction of concepts of liberalization, privatization and globalization that made astonishing changes to the economy. The magical combination of three letters ‘LPG’ facilitated for the establishment of various corporations in the private sector and public sector, besides that the total number of investors who were investing in various corporations was also amplified. Corporate entities are the most important organizations in modern society. They not only satisfy market needs but also provide employment opportunities, creating wealth for the country. Their actions affect the lives of everyone- whether as customers, employees, suppliers, investors in society at large. Given the significance of companies, they clearly need rigorous management and good governance. Corporate governance is essential to evade corporate scams, frauds and irregularities. Major scams like Harshad Mehta’s, Satyam’s, and Kethan Parekh’s shook the confidence of public in corporate investment which indeed called for an exhaustive review of company management. Corporate governance helps companies in strengthening the foundation for long-term economic performance and attractiveness. It is all about balancing individual and societal goals, as well as, economic and social goals. In India lot of studies have been undertaken to simplify the concept of Governance. But very limited studies were undertaken from philosophical and from the ancient perspectives, despite the fact that our ancient Indian literature has enormous potential suggestions of better alternatives for management. Our ancient scriptures, which are beyond mastery, give more information on the type of governance, which existed in ancient period.
Influence of ancient Indian scriptures on governance framework
A. Governance in Ramayana: Rama and Ramayana occupy an important space in the hearts of millions. Ramarajya, as described in Ramayana, has been a part of Indian thinking for centuries. Practically, Ramarajya can be described as a means of putting the idea of good governance at the centre of all governmental activity. It had all the characteristics of democracy.
That is why, Mahatma Gandhi acknowledged Ramarajya as true democracy. In his own words, “In the Ramarajya the meanest citizen could be sure of swift justice without an elaborate and costly procedure. Even the dog is described by the poet to have received justice under Ramarajya.”. What people expect of a democratic state? Liberty, equality, rights, duties and so on. They are indispensable to democracy and Ramarajya, covered all these aspects of democracy.
The vision of the Ramayana has eternal relevance. Law and justice, finance and business, corruption, framing on innocents for monetary gains, injustice to the poor are all mentioned. Rama’s Ramarajya was in true sense a democracy of the people, by the people and for the people. In short, the concept of governance in Ramayana is “to provide the maximum happiness for the maximum number of people, for the maximum period, based on the principles of Dharma-righteousness and moral values”. Ramayana is India’s national idea and is a symbol of good-governance, which we lack in the modern societies.
In short, we can conclude that, in Mahabharata, the foundation of good governance is righteousness in public affairs. The rulers and the employees who have taken oath of their offices to uphold Dharma/righteousness and to take care of public needs, must not act unethically and unjustly because if they do so, they will not only destroy the moral basis of governance but will also turn a state into a hell.
C. Governance in Arthashastra: Kautilya’s Arthashastra is considered to be an ancient Indian discourse on statecraft, economic policy, and military strategy, written in Sanskrit. The Arthashastra literary means the Science of Material gain, but the book has very wide scope. The scope of the books includes discussion on the nature of government, law, civil and criminal court systems, ethics, economics, markets and trade, the methods for screening ministers, diplomacy, theories of war, nature of peace, and the duties and obligations of a king. For both internal administration and foreign relations, the comprehensiveness of its treatment is almost unparallel. Although Kautilya proposed an elaborate welfare state in domestic politics, he was willing to defend the general good of the state with harsh measures.
The Arthashastra equates political governance with economic governance. The end is economic governance while political governance is the means. But as economic objectives are not realized in the absence of political ones, then political governance becomes an end and economic governance the means. ‘The end justifies the means‘, this is supposed to be the basis of Kautilya philosophy. Political power and material wealth according to Kautilya are the means and ends of governance. And good governance – political or economic – depends upon justifying the ends and means as the socio, economic and political conditions.
The three models of governance discussed focus on important components of good governance like justice, equality, dharma, non-violence, economic prosperity, welfare state. The models explain in detail about factors like administration, protection of a state, taxation, judiciary, revenue generation and so on. More importantly, the major focus is on the character of the ruler or the king. A king must exhibit virtues like honesty, compassion, truthfulness, courage, devotion towards the state and the people. He should also be merciful to the citizens and patient towards their problems. All these components of good governance and virtues of king are highly relevant for the contemporary world. The major problems of today’s governance is absence/delay in justice to citizens and absence of virtues like honesty and truthfulness. Centuries ago, ancient Indian rulers knew these are the principles to be followed to achieve good governance and welfare state. It is a sad reality that these fundamental features of ancient governance models are totally missing in the present scenario. Time to introspect and revisit history?