Navigating the Indian corporate purpose dilemma: insights from an entity-based approach

This article contends that Indian corporate law governing corporate purpose embodies a structural tension, evident in two respects: first, an imbalance between directors’ duties and shareholders’ rights which leaves questions around controlling shareholders’ accountability unaddressed; second, contradictions in its underlying theoretical foundations which generate conceptual ambiguities. We examine the Indian approach through an analysis of these interrelated elements, highlighting their implications for the implementation of stakeholder governance. In so doing, we assess three corporate governance theories underpinning the Indian framework, namely, shareholder primacy, stakeholder theory and real entity theory, and how their coexistence reinforces ambiguities. We then evaluate the distribution of powers, rights and duties among corporate constituencies under Indian corporate law, identifying configurations that contribute to governance misalignments. Lastly, we evaluate how anchoring the Indian stakeholder governance approach in the real entity conception can address the identified ambiguities and provide an appropriate theoretical basis for operationalising a broader corporate purpose.