INTRODUCTION
As a result of globalization, business landscapes are changing and regulatory complexity is rising. Businesses must take a proactive approach to manage their digital transformation in an era where the digital world is changing so rapidly. Increasing businesses are revolutionizing competitiveness through digitization. As a result of digitization, information can be shared more precisely, and redundancies are reduced. It will be impossible to precisely predict industry trends in five years even with the rapid rate of technology improvement in the year 2021. Corporate governance refers to the way firms are managed and governed with integrity. It is the responsibility of the boards of directors to manage the companies in which they are involved. Directors and auditors are appointed by shareholders in governance, and they are responsible for ensuring that a suitable governance framework is in place. Management in an effective and responsible manner entrepreneurially for long-term success is the objective of corporate governance.[1] When leaders have access to appropriate technology, digitalization improves their efficiency, providing more efficient processes and relevant data, which improves their ability to take advantage of new opportunities. Therefore, corporate governance becomes more effective and efficient with digitization.[2]
CORPORATE GOVERNANCE IN INDIA
Corporate governance describes a company’s operations and interactions with multiple stakeholders, including consumers, management, employees, the government, and industry organizations, through a set of internal controls, policies, and procedures. The structure of these policies should be infused with transparency, ethics, and integrity.[3] India’s corporate governance framework is made up of the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI) along with other regulatory bodies governing other aspects of governance.[4] India’s corporate governance system safeguards minority shareholders, holds directors and management accountable, ensures timely company reports and disclosures to shareholders, and promotes corporate social responsibility.
INNOVATIVE TECHNOLOGIES IN PREVALENCE
Digitization has benefited many business processes and operations. Rapid digitalization led to the emergence of many new technologies, which simplified, sped up, and improved people’s job duties and, in some circumstances, allowed them to combine them. In addition to significantly enhancing people’s jobs, digitization has also changed the roles of employees. Organizing and manipulating data, solving complex mathematical problems, and completing tasks in a blink of an eye are all benefits of digitalization. The telecom industry traditionally associated 4G technology with speed, however, 5G could enable distributed computing by making processing power accessible locally to consumers.[5] A network of gadgets/devices, the Internet of Things (IoT), will enable enormous opportunities for automation in industry and companies. AI (Artificial Intelligence), Machine Learning, and Cloud technologies can be integrated into RPA to automate tasks, streamline processes, increase worker productivity, and ultimately increased transparency in the compliances.[6]
As a vital component of ensuring data security, Blockchain Technology is a decentralized and secure way to store and update data in a manner that cannot be owned, controlled, or manipulated by any one entity. Its popularity was sparked by Cryptocurrencies, but its uses exist across the board, including financial markets, content distribution, supply chain management, humanitarian aid distribution, and voting in general elections. Business Analytics and Big Data systems can quickly churn through large amounts of transactional data, allowing for dynamic marketing tactics regarding products, pricing, and promotions. E-commerce services include product reviews and consumer customization, marketing, and search optimization, as well as assistance, such as chatbots and analytics.[7] Virtual reality allows customers to test items before purchasing them.
IMPACT OF DIGITIZATION IN GOVERNANCE
A recent impact of the pandemic and emanating digitization can be seen in the increase of virtual meetings conducted pursuant to Companies (Meetings of Board and its Powers) Rules, 2014,[8] Section 173 of the Companies Act 2013, read with Rule 3 and 4 of the Companies (Meetings of Board and its Powers) Rules, 2014, allow companies to convene virtual board meetings and outline the mode and procedure for doing so. By publishing a circular during the second week of April 2020, the Ministry of Corporate Affairs first implemented the provisions relating to extra-ordinary general meetings (EGM) via video-conferencing or other audio-visual means. As of now, market regulators require companies with market capitalizations to use Extensible Business Reporting Language to disclose financial information. As a result of the re-engineering process, the Ministry of Corporate Affairs (MCA) now handles all Companies Act compliance and corporate governance concerns online. Tax returns are submitted online, tax deducted at source return assessments are made, complaints are resolved, and refunds are processed by the Income Tax Department’s central processing centre (CPC). It is no secret that insider trading has been a problem for corporate governance. The miscreants have profited from their prior knowledge by acting based on unpublished price sensitive information (UPSI), resulting in opportunistic buying and selling of their company’s securities.[9] The insider violated fiduciary duty by trading, which is prohibited under the law. Due to a business that created a technique that leverages Blockchain, network users can view the trading done by the various Insiders. It will be nearly impossible to corrupt the stored data after it has been stored for a long time.
The computer software that automates the execution/enforcement of predefined terms of a contract using Blockchain technology is known as a smart contract. The software program’s code is directly derived from the parties’ agreed-upon terms and conditions. Therefore, these are contracts that cannot be modified or renegotiated, and the parties are guaranteed to perform according to the contract.[10] The GST stands for the Goods and Services Tax, an indirect tax on goods and services that applies at several levels. This system of indirect taxation, which is implemented throughout India, reduces cascading effects in other indirect taxes. GST registration and periodic returns, such as GSTR-1, GSTR-2A, GSTR-2B, GSTR-3, GSTR-3B, are also filed online via the GST portal.[11]Digital compliance is now the norm for the majority of FEMA compliances. Several forms are filed online with the Reserve Bank of India (‘RBI’) including the FC-GPR form for allotment of shares to non-residents, the FC-TRS form for transfer of shares from non-residents to residents or vice versa, the LLP-1 form for foreign investments in limited liability partnerships, and the LLP-II form for disinvestment of capital contribution or profit share between resident and non-resident, or vice versa. Department of Promotion of Industry and Internal Trade (DPIIT) has developed a series of web-based applications for all Intellectual Property Rights (“IPRs”)-related issues, from registrations to objections to revisions to undesired show cause hearings. Essentially all kinds of IPRs and related services are available through these portals, including trademarks, patents, designs, and copyrights, among others.[12]
CONCLUSION
Digital transformation hasn’t achieved its entire premise. There are a lot of business leaders out there that are working hard every day to make a difference. Despite having aspirations and ideas, many of them are not digitally literate. Digital transformation is not just about learning a bunch of novice technologies and implementing a full-featured system online. The aim is also to prepare people so that they will be able to adopt digital methods when a necessity arises. Foreign forces using social media to destabilize India and cyber-attacks against Indian infrastructure are both serious threats. With the emergence of digital transformation, cybersecurity has become even more critical. Due to the exponential growth in data, cyber security and threat actors have emerged as key security concerns. Regulations have become more stringent, raising the stakes further for businesses with the Data Protection Bill of 2019. India is stymied by colonial-era legislation and institutions that are reluctant to change, making it difficult for Indian entrepreneurs to adequately capitalize on the approaching technological boom. Thus revisiting various statutes embodied in the Indian Legal System is of utmost significance to remain relevant in the revolutionary changes of the world and to adapt to the fourth revolution of technological advancements.
New opportunities and risks are introduced by digital transformation. Developing a dedicated team is crucial to enhance accountability, transparency, and focus. Good governance is an essential component of transparency in organizations and economic entities. As a result of a lack of transparency, the business’s workflow will be slowed down, as a lack of information will serve as a roadblock, interrupting the flow of work. Adopting and competing in the world of rapid technological advances is incredibly difficult for India. Despite this, the technology is still in its infancy and is constantly evolving, with many benefits still awaiting discovery. In the end, it will be up to us to embrace and strengthen Corporate Governance as well as the benefits of Digital Transformation.
Author(s) Name: Aathira Pillai (University of Mumbai)
References:
[1] ‘What Corporate Governance Means For The Bottom Line’ (Investopedia) <https://www.investopedia.com/terms/c/corporategovernance.asp> accessed 16 March 2022
[2] ‘Corporate Governance And Digitalization| EDICOM’ (Edicomgroup.com) <https://edicomgroup.com/blog/corporate-governance-and-digitalization#:~:text=Digitalization%20enables%20leaders%20to%20work,more%20efficient%20corporate%20governance%20processes> accessed 16 March 2022
[3] ‘Corporate Governance In India – Why Is It So Critical?’ <https://www.proschoolonline.com/blog/corporate-governance-india> accessed 19 March 2022
[4] ‘Corporate Governance In India – Practices, Framework’ (Deloitte India) <https://www2.deloitte.com/in/en/pages/risk/articles/governance-101.html> accessed 19 March 2022
[5] ‘Telecom Industry In India’ (Ibef.org) <https://www.ibef.org/industry/telecommunications.aspx> accessed 19 March 2022
[6] ‘Artificial Intelligence, Machine Learning, Deep Learning And More’ (Sas.com) <https://www.sas.com/en_us/insights/articles/big-data/artificial-intelligence-machine-learning-deep-learning-and-beyond.html> accessed 19 March 2022
[7] ‘Chatbots-Explained’ (Ibm.com) <https://www.ibm.com/cloud/learn/chatbots-explained> accessed 19 March 2022
[8] ‘Companies (Meetings Of Board And Its Powers) Rules, 2014’ (Mca.gov.in) <https://www.mca.gov.in/Ministry/pdf/NCARules_Chapter12.pdf> accessed 23 March 2022
[9] ‘UPSI: Why And How You Need To Keep It Safe’ <https://www.pwc.in/assets/pdfs/services/ras/upsi.pdf> accessed 19 March 2022
[10] ‘What Are Smart Contracts On Blockchain?’ (Ibm.com) <https://www.ibm.com/topics/smart-contracts#:~:text=Smart%20contracts%20are%20simply%20programs,intermediary’s%20involvement%20or%20time%20loss.> accessed 19 March 2022
[11]‘KPMG GST Compliance Pilot’ <https://home.kpmg/content/dam/kpmg/in/pdf/2020/01/KPMG-GST-Compliance-Pilot.pdf> accessed 19 March 2022
[12] ‘Chartered Secretary’ (Icsi.edu) <https://www.icsi.edu/media/webmodules/linksofweeks/ICSI-January_2022.pdf> accessed 19 March 2022
