21 Nat'l L. Sch. India Rev. 1 (2009)

handle is hein.journals/nlsind21 and id is 1 raw text is: ARTICLES

A CAUTIONARY TALE OF THE TRANSPLANT EFFECT ON
INDIAN CORPORATE GOVERNANCE
Umakanth Varottil
During the last decade, there has been a sustained effort on the part of Indian
regulators to strengthen corporate governance norms. This has been strongly
influenced by developments that occurred in other parts of the world, particularly
the Sarbanes-Oxley Act in the U.S. and the Cadbury Committee Report in the
U.K. This study reflects upon whether the policies adopted by the Indian
regulators are adequate or whether they require some mid-course correction.
With that in mind, this Article adopts a revisionist approach with the help of two
simple assertions, develops thosefurther and leaves some food for thought leading
to possible further detailed normative research. The twin assertions are: (i) the
broad features of the Indian corporate governance norms have been transplanted
from other jurisdictions such as the U.S. and U.K. that follow the outsider
model ofcorporate governance, and hence those norms are not likely to be suitable
for implementation in addressing governance problems in India, which follows
the insider model; and (ii) recent events involving the collapse of several
leadingfinancial institutions provide evidence, at least anecdotal in nature, that
the corporate governance norms followed in the U.S. and U.K. have not been
effective in preventing large-scale corporate governance failures, thereby raising
questions about the efficacy of that model in the Indian context.
Through these assertions, this Article makes the case that the source for
strengthening Indian corporate governance lies within. Seeking out othersystems
B.A., LL.B (Hons.), National Law School of India University, Bangalore, LL.M
(Corporations), New York University School of Law; PhD Candidate, Faculty of
Law, National University of Singapore. I thank Shaun Mathew, Nuggehalli Nigam,
Jayant Thakur and Hans Tjio for their thoughtful comments on an earlier draft of
this Article. I am also grateful to the panelists (Roel Campos, John C. Coffee,
Vikramaditya S. Khanna and Michael Useem) as well as participants at the panel
discussion entitled Beyond Satyam: Analyzing India's Corporate Governance organized
by the Jindal Global Law School in New York on February 4, 2009, whose insights
have been invaluable in refining several positions adopted in this Article. Needless
to say, any errors or omissions remain mine alone.

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