In response to the postliberalization challenges of the 1990s, where liberalization exposed inefficiencies in Indian companies, the Department of Company Affairs, Ministry of Law, Justice and Company Affairs, set up a study group to enhance India’s global competitive edge through improved corporate governance. The committee was chaired by Sanjeeva Reddy, Secretary, Department of Company Affairs, and members included Kumar Mangalam Birla (Chairman, Aditya Birla Group); M. R. Rao (Director, Indian Institute of Management Bangalore); N. H. Mirza (C/o S R Batliboi and Company); P. M. Narielvala (Former Senior Partner, S R Batliboi & Company, and Past President, The ICAI, Calcutta); M. B. Athreya (Management Adviser, New Delhi); Maninarayan Swami (Adviser, UB Group of Companies); Mukesh Ambani (Vice-Chairman and MD, Reliance Industries Limited); Rajiv Chandrasekhar (CMD, BPL Telecom Centre); A. Ramaswamy (Joint Secretary, Department of Company Affairs); S. Rajagopalan (Former Chairman, MTNL, New Delhi); G. Sitharaman (President, The Institute of Chartered Accountants of India, New Delhi); and J. Sridhar (President, The Institute of Company Secretaries of India, New Delhi, and Controller of Finance & Company Secretary, Maharashtra Scooters Limited, Pune). It was tasked with addressing inconsistent governance practices, enhancing accountability, and transitioning from a regulated to a liberalized market. Additionally, the report aimed to address inefficiencies in public sector units by recommending reduced bureaucratic constraints and enhanced entrepreneurial capabilities.

The report’s findings emphasized the critical role of boards of directors in policy making and oversight, distinct from executive management’s role in implementation of the policies decided by the board. It recommended greater roles for independent nonexecutive directors to ensure directors’ independence and prevent conflicts of interest, stricter penalties for noncompliance with listing requirements, and legal validation of electronic conferencing to facilitate board participation. The report also proposed a centralized National Listing Authority for tougher listing and compliance standards, improved transparency in accounting and reporting practices, and the introduction of the concept of interested shareholders to prevent conflicts of interest in voting. Emphasis was placed on corporate social responsibility and ethical business practices, and the report recommended instituting a code of behavior for public sector enterprises and reducing their surveillance by multiple agencies.

The committee concluded with several key recommendations of legislation to be immediately implemented and desirable practices to be voluntarily adopted by companies. It proposed establishing an autonomous Centre for Corporate Excellence to serve as a repository of knowledge for corporate governance, funded by the government and industry associations. The center’s functions would include research, promotion of education, and accreditation of companies for good governance practices. The report also recommended creating an Internal Audit and Assurance Cell, to ensure board accountability, and adopting international best practices in corporate governance. It advocated phased implementation of governance measures based on company size and market requirements, and it emphasized the importance of good corporate governance for improving a company’s credibility and market acceptance.

The recommendation to establish a Centre for Corporate Excellence was not implemented. The recommendation to create internal audit systems within companies was accepted and realized as a regulation governing large listed firms.

The report addressed governance issues such as conflicts of interest, insufficient board accountability, and lack of transparency, recommending stronger roles for independent directors, stricter compliance standards, and improved corporate ethics. These measures aimed to enhance corporate governance and strengthen credibility of financial markets.