Byju’s and Paytm, once celebrated unicorns, have faced significant setbacks due to governance issues. Byju’s saw its valuation plummet by 99%, leading to calls for the founder’s removal, while Paytm’s banking arm faced regulatory restrictions due to non-compliance concerns. These incidents underscore the importance of adherence to laws and regulations, alongside innovation and growth.
Corporate governance lapses extend beyond startups to encompass large organizations, including Satyam, IL&FS, Yes Bank, and the NSE. Common threads among these cases include self-centered promoters, growth-at-all-costs mentality, lack of transparency, regulatory delays, and market leniency towards poorly managed companies.
Self-centered promoters often prioritize their interests over those of minority shareholders, leading to accountability issues. Additionally, a “growth at all costs” mentality, fueled by VC pressure, can prompt entrepreneurs to overlook controls and processes. Weak disclosure requirements and friendly boards further exacerbate governance concerns.
Regulatory enforcement, particularly by SEBI, is criticized for its slow and selective approach, allowing errant managements to evade consequences. Moreover, India’s stock markets often fail to penalize poorly managed companies, hindering true price discovery.
To address these challenges, India must emphasize good corporate governance as the foundation of successful businesses. This entails fostering trust among stakeholders, adhering to international standards, and holding auditors and boards accountable for oversight failures. Ultimately, ethical practices enhance brand value, market competitiveness, and long-term success in today’s globalized business environment.
