Revising Self-Regulation as a Mode of Corporate Governance: Regulator as Promoter of Self -Regulation.

Abstract

It has long been believed that corporate self-regulation offers significant advantages for reducing unlawful or unethical corporate behavior over the alternative of increased direct governmental regulation of corporate activities. It is this point where corporate responsibility and governance intersect. The law is limited in its ability to regulate business behavior in situations where the cost of enforcing laws may be too great, or the enforcement of laws would require the violation of higher values in the society, or ethical standards or norms for behavior cannot be easily translated into objective, judiciable, legal standards. Developing concept of Self regulation is a reflection of the global market which is going through transition. State is withdrawing from the market as a regulator, promoting deregulation and dissolving barriers. The limited jurisprudence of self regulation draws from the principle of positive and negative incentives as motivating factors. The objective of the article is to review the recommendations of the Cadbury committee and the J.J. Irani committee on self regulation in corporate governance and suggest a proposed model befitting the Indian scenario. Part I covers the existing jurisprudence of corporate governance in our country. Part II highlights self regulation as a mode of corporate governance. In light of inapt enforcement of regulations and existing working model of self regulation, the article in part III suggests the designing of a successful system where in the regulators promote self regulation thereby striking a balance between open market freedom and state intervention. The proposal has been justified in the context of the current Indian corporate sector so as to establish its relevance.