This article has been written by Sourav Sanyal pursuing an Executive Certificate Course in Corporate Governance for Directors and CXOs from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Introduction

India’s rapid economic growth and being the 5th largest economy by GDP, with a rapidly evolving technological landscape, are witnessing a significant change in corporate governance practices due to digital technology disruption. When technology percolates to the very core of business operations, from decision-making to stakeholder engagement, in the corporate sector of India, corporate governance is essential for surviving this period of transition and upskilling and adapting to digital disruption. In this article, let’s explore the relationship between digital disruption and how corporate governance in India can adapt to such challenges, focusing on how businesses are adjusting to such technological advancements and remaining competitive in India as well as around the world.

Current corporate governance scenario in India

Good progress has been made by regulatory bodies and industry associations in advocating diversity as a greater representation of women, minorities, and talents with diverse backgrounds for equal opportunities across geographies on corporate boards. Virtual meetings, online training and skill development sessions, and collaborative digital operations can help foster an inclusive environment where diverse feedback & comments are heard and valued, which drives transparency. Companies in India are slowly adopting digital tools to facilitate stakeholder engagement, such as virtual annual general meetings, online investor relations portals, and social media channels solely dedicated to corporate communications. Through upskilling, boards and senior management teams need to enhance their digital literacy and acumen to navigate complex technological landscapes effectively. Continuous education and skills training programmes can bridge the knowledge gap, foster a culture of innovation and develop competency levels. Corporations need to leverage digital platforms, as they will not only disseminate information more efficiently but also solicit feedback, address concerns, and cultivate trust among their stakeholder base. This two-way communication will promote a culture of transparency and accountability, aligning corporate practices with stakeholder expectations and industry norms. With data centres and computing emerging as critical assets termed the ‘oil of the future’ in the digital economy, robust corporate governance policies and the framing of relevant protocols are paramount to ensuring proper compliance with regulatory requirements on data gathering, storage, and safeguarding against data misuse and errors.

Advantages of technology in corporate governance

The digital transformations have fundamentally challenged the way companies traditionally used to operate, communicate, and engage with stakeholders against the established norms in corporate governance. Currently, companies need to use automation, cloud computing, SaaS, data analytics, artificial intelligence, blockchain, etc. to streamline the decision-making processes, increase efficiencies, increase transparency and trust, and scale operations across functions. The way technology is integrated into the system will change how boardrooms operate, and require a paradigm shift in the mindset of employees to learn newer skills that are relevant to the systems and processes. The expansion of digital technologies will drive cost efficiencies and revolutionise corporate business operations across all sectors of the Indian industry landscape. Technology has revolutionised corporate governance, offering numerous advantages that enhance transparency, accountability, and efficiency within organisations.

1. Improved transparency:
   • Digital platforms enable real-time access to corporate information, such as financial reports, board meeting minutes, and proxy statements.
   • Shareholders can stay informed about company decisions, ensuring greater transparency in governance processes.
   • Electronic voting systems allow shareholders to participate in decision-making remotely, promoting inclusivity and accountability.
2. Enhanced communication:
   • Technology facilitates efficient communication between board members, executives, and shareholders.
   • Virtual board meetings and video conferencing tools enable effective collaboration and decision-making, overcoming geographic barriers.
   • Social media and online forums provide channels for open dialogue and feedback, fostering better stakeholder engagement.
3. Streamlined decision-making:
   • Digital tools streamline the decision-making process by automating repetitive tasks and providing real-time data analysis.
   • Board portals centralize and organize governance-related documents, making it easier for directors to access and review relevant information.
   • Data analytics tools help boards make informed decisions by identifying trends, evaluating risks, and assessing performance metrics.
4. Increased compliance:
   • Technology aids in regulatory compliance by providing automated monitoring systems and risk assessment tools.
   • Compliance software ensures adherence to legal and ethical standards, reducing the risk of non-compliance.
   • Digital record-keeping ensures secure storage and easy retrieval of governance-related documents, facilitating audits and investigations.
5. Cost reduction:
   • Virtual meetings and digital communication channels eliminate the need for physical travel, resulting in significant cost savings.
   • Cloud-based governance solutions provide cost-effective alternatives to traditional on-premises systems.
   • Automating routine tasks frees up board members’ time, allowing them to focus on strategic issues.
6. Environmental sustainability:
   • Technology promotes environmental sustainability by reducing paper usage and eliminating the need for physical documents.
   • Virtual meetings and electronic voting systems minimize carbon emissions associated with travel.
   • Digital reporting and disclosure platforms enhance transparency while reducing the environmental impact of printed materials.
7. Risk management:
   • Risk management tools help boards identify, assess, and mitigate potential risks.
   • Early warning systems and predictive analytics enable proactive risk management, ensuring timely responses to emerging challenges.
   • Technology facilitates the implementation of robust internal controls, minimising the likelihood of fraud and misconduct.

Overall, technology has brought significant advantages to corporate governance, enhancing transparency, communication, decision-making, compliance, cost-effectiveness, environmental sustainability, and risk management. As technology continues to evolve, organisations can leverage these advancements to further strengthen their governance practices and improve overall stakeholder confidence.

AI technology in decision making

The Indian government’s recent changes in digital policies and initiatives, including opening the doors of the market to private companies and giving special thrust to the indigenous start-up ecosystem, have led to rapid technological adoption, leading to digital transformations in recent years. The dynamics of the boardroom are being completely revamped by AI-powered solutions enabling real-time insights, business analytics, risk assessment and mitigation capabilities. Systems & process automation and compliance monitoring ensure ethical behaviour with adherence to legal requirements and are driven by factors such as increased internet penetration, smartphone adoption, the 5G network, and UPI as part of the Digital India initiative, which has led to improved productivity across functions. A significant impact of AI-powered digital technology on corporate governance is improved decision-making prowess, risk assessment, increased accessibility, and seamless dissemination of information across the globe. Companies can predict early changes in market movements, identify patterns, detect any anomalies, and make data-driven decisions, thanks to data analytics & AI algorithms. Under the Companies Act 2013, the demand for well-protected, structured, responsive online platforms, corporate disclosures, financial reports, and other crucial documents is now available at a single click of a button, empowering shareholders, investors, and regulatory bodies to scrutinise corporate activities more closely for anomalies.

In the recent past, Indian corporations and businesses have started adopting new digital technologies, but they also face problems when it comes to tackling cybersecurity, data protection or breaches, and regulatory compliance. It opened the floodgates for companies with plenty of opportunities to develop, collaborate, and establish their competitive edge in the global market as a result of digital disruptions. This digital transition has brought about a paradigm shift in corporate governance practices, necessitating a re-evaluation of heretofore traditional policies & frameworks, which had many loopholes. Implementing an agile governance framework and taking advantage of generative AI technology, characterised by flexibility, decentralisation, and iterative decision-making, can facilitate faster adaptation to evolving digitalization for higher productivity within organisations. On the flip side, businesses are now susceptible to areas like malicious attacks, data breaches, and cyber-hacking as a result of ongoing digitalization and must be very vigilant to counter them. It becomes the responsibility of companies to protect sensitive private data; strong cybersecurity guardrails must be in place, and staff members must receive best practices training. Board meeting discussions must focus on dealing with cybersecurity, data privacy, and digital transformation initiatives to mitigate risks and capitalise on opportunities.

Complying with digital regulatory guidelines

For corporations operating outside of India, compliance with strict data privacy legislation is essential. The corporate digital channels must be set up as a mandatory protocol to offer newer tools for shareholders’ communication and engagement. Events like virtual annual general meetings (AGMs), webcasts, and online voting enable broader participation and inclusivity, empowering shareholders to air their opinions and concerns effectively, thus ensuring timely actions. Effective risk management frameworks incorporating technology-associated risk assessments, cybersecurity protocols, crisis management strategies, and AI adoption are essential to safeguarding corporate assets and reputation, including regular vulnerability assessments, threat intelligence, model monitoring, and employee awareness programmes. A very practical approach to cybersecurity ensures the integrity and confidentiality of sensitive information. Complying with and adhering to ever-changing policy standards necessitates a proactive approach to risk and governance. Furthermore, the board of directors (BoD) must play an active role in overseeing cybersecurity risks and ensuring that adequate resources and expertise are allocated to mitigate potential threats by establishing a cybersecurity committee of experts. With constantly changing rules in the industry, technology standards require a boost in flexibility and an adaptive approach to managing risk and governance. Digital communication channels like social media and online forums have given stakeholders a powerful voice. They can now easily express their concerns, share their opinions, and hold companies accountable for their actions. Companies can analyse this feedback through a sentiment analysis. As the digital era continues to evolve, regulatory bodies in India must continue to work hard to amend corporate governance frameworks to address the forthcoming challenges and opportunities presented by digital technologies for stakeholders’ interest. The rapid pace of technological change will always pose a certain degree of challenge for regulators, as they are the watchdogs who must keep up with emerging trends, potential risks, system breakdowns, and data loss. SEBI has taken major steps by mandating the use of digital tools and platforms for corporate filings, disclosures, and investor communications. This helped to streamline processes and improve accessibility, fairness and transparency. It has also framed relevant guidelines on cybersecurity practices, data protection, and online shareholder participation. This ensures companies adhere to best practices in evolving digital technology. Building dynamic collaborations between regulators, industry associations, and corporate leaders is paramount. This will foster an agile and responsive regulatory environment that supports innovation while still protecting stakeholder interests. It’s a delicate balance, but it’s essential to maintain as the digital landscape continues to evolve.

Harnessing technology for governance success

To prosper in the digital age, companies must embrace flexible methods, encourage innovation, and establish a strong governance structure. Companies in India may confidently manage the complexity of digital transformation by embracing technological developments, reinventing business models, and upskilling their staff through training programmes and digital literacy initiatives to facilitate technological transformation and promote creativity. Developing a motivated and dedicated team for handling hindrances posed by a rapidly changing digital technology landscape, with multiform perspectives and experiences will become invaluable assets for innovation, risk reduction, and sustainability. Therefore, corporations must set up an innovative culture and promote an environment of experimentation, invention, and teamwork.

By leveraging cutting-edge tools and innovations, governments worldwide can enhance their operations, improve service delivery, and foster greater transparency and accountability.

1. Streamlined government services:
   Technology enables governments to streamline their services and improve efficiency. Online portals and mobile applications allow citizens to access essential services such as license renewals, tax payments, and utility management from the comfort of their homes. This reduces the need for physical visits to government offices, saving time and resources.
2. Enhanced data-driven decision-making:
   Big data analytics and artificial intelligence (AI) empower governments to make data-driven decisions based on real-time information. Governments can use data to identify trends, predict outcomes, and allocate resources more effectively. This data-driven approach leads to better policy formulation and service delivery.
3. Improved communication and transparency:
   Technology facilitates seamless communication between governments and citizens. Social media platforms, email newsletters, and mobile notifications keep citizens informed about government initiatives, upcoming events, and important announcements. Governments can also use these channels to gather feedback and input from the public, fostering a more participatory and responsive governance system.
4. Strengthening accountability and integrity:
   Technology can be harnessed to combat corruption and promote accountability within governments. Blockchain, a distributed ledger system, provides a secure and transparent way to track transactions and maintain records. This reduces the risk of fraud and manipulation, enhancing the integrity of government processes.
5. Bridging the digital divide:
   Governments can use technology to bridge the digital divide and ensure equal access to public services. By providing free Wi-Fi hotspots in underserved areas and offering digital literacy programmes, governments can empower citizens to participate actively in the digital era.
6. Collaborative governance:
   Technology facilitates collaborative governance, enabling governments to work together effectively at various levels. Online platforms and video conferencing tools enable officials from different departments and regions to communicate, share information, and coordinate efforts. This collaboration enhances coordination and ensures a cohesive approach to governance.
7. Open data and public participation:
   Governments can leverage open data initiatives to make public data accessible to citizens and researchers. This promotes transparency, enables independent analysis, and encourages civic engagement. Citizens can use open data to hold governments accountable and develop innovative solutions to societal challenges.
8. Ethical considerations and cybersecurity:
   While technology offers immense potential for governance success, governments must address ethical considerations and cybersecurity risks. Privacy laws and regulations must be in place to protect citizens’ data and ensure responsible use of technology. Additionally, governments need to invest in robust cybersecurity measures to safeguard their systems from cyberattacks.

In conclusion, harnessing technology for governance success is a strategic imperative in the 21st century. By embracing innovative tools and solutions, governments can improve efficiency, enhance transparency, strengthen accountability, and drive more inclusive and responsive governance practices. As technology continues to evolve, governments must adapt and navigate the digital landscape responsibly to create a prosperous and sustainable future for all.

Conclusion

In India, corporate governance needs to evolve very fast to keep pace with the advancing digital technology disruptions and digitally transform the Indian business landscape. For this, companies need to align themselves with plans for long-term growth and success by tapping technology, welcoming innovation, and cultivating an adaptable culture in their workforce. In the fast-paced world of business, being able to adapt to technological changes in a manner which is ethical, responsible, and inclusive to corporate governance practices is a sign of mature mindset.

Companies must be ready as technology continues to reshape the corporate business landscape to think beyond, usher in a culture of transparency and accountability, and leverage the digital tools to drive sustainable and inclusive growth while keeping in mind stakeholder value creation. Forming alliances and partnerships will enable companies to share valuable resources and build a roadmap to address common challenges in the future. Hence, building a tech ecosystem by collaborating with technology leaders, startups, and industry peers can help tap cutting-edge solutions and expertise to rapidly accelerate digital transformations in India.

References

• Digital India. Ministry of Electronics & Information Technology, Government of India.
• Deloitte India. (2021). Digital disruption and corporate governance. 
• https://www2.deloitte.com/in/en/pages/governance-risk-and-compliance/articles/digital-disruption-corporate-governance.html
• Corporate Governance in India: The Changing Paradigm. NSE Centre for Excellence in Corporate Governance.