The prevailing law and economics account treats the evolution of corporate law as a series of neutral, efficiency-driven adjustments. Scholars who study the Global South describe something messier. Corporate law in any given country is the product of political and economic tensions among managers, controlling shareholders, institutional investors, employees, and the state. India—the world’s largest democracy and its fifth largest economy—is one of the best places to watch that process unfold, and, increasingly, it is a mirror for the United States.

In a new essay, I draw on two strands of my existing scholarship on Indian corporate governance, one on controlling stockholder power and one on the debate over corporate purpose, to argue that the Indian experience is a cautionary tale. Governance reforms can be co-opted to fuel crony capitalism and deepen inequality when corporate power is unrestrained.

Promoter Dominance and the Limits of “Good Governance”

Beginning in the late 1990s, the Securities and Exchange Board of India (SEBI) launched sweeping corporate governance reforms through Clause 49 of the stock exchange listing agreement, a framework modeled closely on the UK’s Cadbury Report, the OECD Principles, and the U.S. Sarbanes-Oxley Act. Clause 49 required independent directors, independent audit committees, CEO and CFO certification of financial statements, and enhanced disclosure. The Companies Act 2013 later codified and expanded these core corporate governance standards from Clause 49 into statutory law.

Formal convergence, however, did not deliver functional convergence. Compliance among companies listed on the Bombay Stock Exchange ranged from roughly 43 to 70 percent, with state-owned undertakings and smaller private firms especially resistant, and SEBI’s enforcement was both delayed and narrow. Three structural barriers stood in the way. Inter-agency conflict between SEBI and the Ministry of Corporate Affairs produced competing committees and conflicting standards. Concentrated ownership by family business groups and state-owned enterprises produced weak boards and little shareholder activism. And a judiciary in which corporate cases could take up to twenty years to resolve effectively foreclosed private enforcement.

The deeper problem is that India’s corporate governance reforms borrowed a monitoring model built for dispersed shareholding and manager-shareholder conflict. India’s central governance problem is different: protecting minority shareholders from controlling shareholders, known locally as promoters, who nominate and elect the very directors meant to monitor them. The infamous Satyam Computer Services scandal made the point vividly. The company had a globally renowned independent board that satisfied Clause 49, and yet its founder and controlling promoter later admitted to fabricating more than $1 billion in fictitious cash assets, with independent directors having unanimously approved a self-dealing related party acquisition that advanced the fraud. In the aftermath, more than 620 independent directors resigned from Indian boards, an unprecedented figure globally. The reform response leaned heavily on voluntary guidelines and a comply-or-explain approach, leaving the promoter-minority conflict only partially addressed.

The same gap between rules and practice appears in risk oversight. The Companies Act 2013 imposes general risk obligations on boards, and SEBI’s Listing Regulations require the largest listed companies to form risk management committees, a mandate that has expanded from the top 100 companies to the top 500 and, prospectively, the top 1,000. Yet when IL&FS, India’s leading infrastructure finance company, collapsed in 2019 with a $12.8 billion debt default, its board committees, including the risk management committee, had not met in years. The collapse of IL&FS demonstrated structural barriers that persistently impede effective risk oversight in Indian firms. Promoter dominance means independent directors are often beholden to controlling shareholders for their appointments, for access to information, and for the resources to exercise risk oversight.

Stakeholderism, Co-opted

India’s mandatory corporate social responsibility (CSR) regime is the most studied stakeholder experiment in the world. Section 135 of the Companies Act 2013 requires companies above certain size or profit thresholds to spend at least 2 percent of net profits on CSR, overseen by a board-level committee. Section 166 goes further than U.S. law, directing directors to consider the best interests of employees, shareholders, the community, and the environment.

Filtered through promoter dominance, the results are sobering. Philanthropic giving has risen, but spending has been concentrated in wealthier states rather than the neediest ones, and large firms that had voluntarily exceeded the 2 percent threshold pulled back once the mandate arrived. Promoters routinely name large CSR projects after themselves or their families, converting mandatory corporate spending into personal legacy building and a “philanthropic glow” to advance their social standing. Section 166’s duties are effectively unenforceable, since stakeholders have no meaningful remedies, and directors remain beholden to controllers for election to their seats. Most pointedly, the channeling of unspent CSR funds into government-controlled accounts creates openings for political capture. In an environment where the boundaries between business and politics are porous, stakeholderism loses its transformative potential. Instead, it offers a rhetorical shield, allowing the state to signal social concern while the underlying structures of inequality and environmental degradation remain unaddressed as controlling shareholder power grows.

The Billionaire Raj and the American Mirror

By 2023, 23.3 percent of India’s national income went to the top 1 percent, and the top 1 percent’s share of wealth stood at 40.1 percent, making the “Billionaire Raj” more unequal than the British Raj it succeeded. Promoters have become primary conduits for political campaign financing, and business elites sit on the parliamentary committees that shape the regulations governing their own industries. Here, the potential concerns with controlling stockholder power are not just limited to abuse of minority shareholders but extend to concern about exploitation of other stakeholders and the broader political and social environment, laying the groundwork for erosion of rights and democracy.

American readers should find this uncomfortably familiar. Economic inequality here has risen sharply, dual-class founder-dominated firms have proliferated, and controlling stockholders and their proxies have been deeply involved in recent corporate law changes that favor controllers and insiders. Scholars warn that these changes open multiple channels for opportunistic conduct and substantial private benefits.

For scholars of India, the concentration of wealth and political influence now reshaping U.S. corporate law is a familiar story. For scholars of the United States, India is no longer a distant comparison. It is a preview.

Afra Afsharipour is John D. Ayer Endowed Chair in Business Law & Martin Luther King, Jr. Professor of Law at UC Davis School of Law. This post is based on her recent essay, “The Political Economy of Corporate Law: India and Beyond,” available here.