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Tata-Mistry case: First-round victory for corporate democracy in India

The NCLT held that corporate governance does not take precedence over corporate democracy, but is part of corporate democracy.

Mukesh Butani & Karan Lahiri

The central challenge of corporate governance is to align the interests of ownership and management, and their role in ameliorating problems arising from conflicts of interest. Diffused ownership structures result in a management that is not held accountable for its actions, because small shareholders lack the incentives to act as watchdogs, creating principal-agent problems. On the other hand, large shareholders are in a better position to absorb the costs of monitoring and have the necessary voting power to influence corporate decision-making, but this, in turn, leads to ...