E-GOVERNANCE A NEW DIMENSION OF CORPORATE

GOVERNANCE
Dr. Amita Charan

Asst. Professor in Commerce JDMC, Delhi University

The subject of electronic governance is a relatively new discipline and subject of significance for
both public policy and marketers. It is useful to recognise that it is a dynamic concept, in terms
of scope, thrust and relevance. East- Asian crisis gave a new dimension to corporate governance
researches in the context of financial stability and ethical practices. This has attracted
worldwide attention particularly since 1990s, due to the totally unexpected collapse of a few
giant corporations in the United States such as world energy leader Enron, WorldCom,
Adelphia, Tyco, Global Crossing etc. United Kingdom had also witnessed several cases of
corporate corruption and collapse, which led to setting up of Cadbury (1996), Greenbury, and
Hampel (1997) committees during mid90s. the terms of references of all these committees
differed from each other but the core objectives of all of them was to find out the root causes of
corporate corruption and frauds and suggest suitable remedies to drastically minimize, nay,
eliminate such corporate scams as far as possible. This debate was driven partly by the
subsequent enquiries into corporate governance (Cadbury Report) and partly by extensive
changes in corporate structure. In May 1991, the London Stock Exchange set up a Committee
under the chairmanship of Sir Arian Cadbury to help raise the standards of corporate
governance and the level of confidence in financial reporting and auditing. The Committee
investigated accountability of the Board of Directors to shareholders and to the society. It
submitted its report and the associated ‘code of best practices’ in December 1992 wherein it
spelt out the methods of governance needed to achieve a balance between the essential powers of
the Board of Directors and their proper accountability. Being a pioneering report on corporate
governance, it would perhaps be in order to make a brief reference to its recommendations
which are in the nature of guidelines relating to among other things, the Board of Directors and
Reporting & Control. The OECD set out its corporate governance in 1999 and revised them in
2004. Basal Committee on Banking Supervision published guidelines on corporate governance
in banks in 1999. As an updated in July 2005, the Basal Committees has issued a Consultative
Document on enhancing corporate governance for banking organisations, seeking comments by
the end of October 2005. Recently a strong need of good e-governance practices is also felt by
the corporate bodies and Indian Government. With the advent of ICT initiatives and capacity
building in government and banking sector the transparency and speed of information
processing is increasing. This paper is presenting an overview of e-governance initiative in India
and the way it influences corporate governance and registering remarkable success of MCA21.

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 E-GOVERNANCE A NEW DIMENSION OF CORPORATE

GOVERNANCE

1.0 Glimpse of Corporate Governance and E- Governance in India

Electronic governance initiatives are part of our national planning and development planning

almost in every country. Presently from the services to the manufacturing sector no sector is

untouched from e-governance. The World Bank defines “e-governance” as the use of

information and communication technologies by government agencies to transform relations

with citizens, business and other arms of the government.” Information technology initiative

incorporated in various segments has added a new dimension of governance via transparency

and accuracy. E-governance is a kind of ‘window of opportunity’ facilitating a much faster,

convenient, transparent and dynamic interaction between the government and its people. Private

sector, public sector and society all the interconnected. Therefore the e-governance is viewed as

an ongoing process subjected to rapid changes based on experiences, developments, reforms and

policy setting.

E-Governance involves new visions of leadership, new ways of debating and providing new

horizons for deciding policy and investment. It is developing new ways of accessing

information, empowering citizens, organising and delivering services with more efficiency.

Therefore, The National E-governance Plan (NeGP) was approved by government in the year

2006, comprising of 27 Mission Mode Projects (MMPs), 8 components (Income Tax, MCA21,

Insurance, Central Excise, National ID, Pension, Banking, Passport) and 11 state projects

(Agriculture, Employment Exchange, Commercial Tax, Land Records, Road Transport, Gram

Panchyat, Municipalities, Police, Property Registration, Treasuries and e-districts). Long back e-

filing, e-documentation, e-agreements and e-registration of companies was a dream for many.

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Ministry of Corporate Affairs (MCA) has embarked upon an ambitious e-governance project

called the MCA21 e-governance programme and spending huge amount for e-filing and e-

registration. It also aims at continuously repositioning MCA as an organisation capable of

fulfilling the aspirations of its stakeholders in a globally competitive business environment. In

Indian scenario it is essential to focus corporate governance practices on stakeholders because of

three major reasons; firstly private sector and MNCs are dominated by stakeholders, secondly

family business exercise undue control over a company and thirdly regulatory framework is

hassled. In a largest democracy the voice of people want change in governance and complete

removal of corruption. Commencing business in India was a challenging and lengthy process

few years back. Now a days the e-governance initiatives are providing a sound support to

business and authorities.

1.1 Intersecting Dimensions of Corporate Governance and E-governance:

E-governance can be attained in four succeeding steps: information or cataloguing, transaction,

vertical integration and horizontal integration. India has already achieved the first, second and

third stage of e-governance also attained success in implementation of these phases. Presently

our country is on the verge of attaining the fourth and final stage which is most challenging. Still

there are number of issues untouched, untapped and unexplored. Geographical, social and

economic disparities are the biggest barriers for full-fledged governance. Illiteracy, lack of

infrastructure, security and privacy of personal and financial data are other constraints. Good

governance has 8 major characteristics. These characteristics intersect with corporate practices

as India is a mixed economy where public and private organisations interact with each other at

various stages. It assures that corruption is minimized, the views of minorities are taken into

account and that the voices of the most vulnerable in society are heard in decision-making. It is

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also responsive to the present and future needs of society. In order to control a largest

democracy like India it is essential to revitalised good corporate governance from the bottom to

the top. These dimensions are discussed here in brief:

Participation: Participation of people is key ingredient of e-governance at all the level and from

all the segments. Participation could be either direct or through legitimate intermediate

institutions or representatives. It is important to point out that representative democracy does not

necessarily mean that the concerns of the most vulnerable in society would be taken into

consideration in decision making. Participation needs to be informed and organised. This means

freedom of association and expression on the one hand and an organised civil society on the

other hand.

Transparency: means that decisions taken and their enforcement are done in a manner that

follows rules and regulations. It also means that information is freely available and directly

accessible to those who will be affected by such decisions and their enforcement. It also means

that enough information is provided and that it is provided in easily understandable forms and

media.

Effectiveness and efficiency: Good governance means that processes and institutions produce

results that meet the needs of society while making the best use of resources at their disposal.

The concept of efficiency in the context of good governance also covers the sustainable use of

natural resources and the protection of the environment.

Responsiveness: Good governance requires that institutions and processes try to serve all

stakeholders within a reasonable timeframe and appropriate solution.

Accountability: is a key requirement of good governance. Not only governmental institutions but

also the private sector and civil society organisations must be accountable to the public and to

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their institutional stakeholders. Who is accountable to whom depends on whether decisions or

actions taken are internal or external to an organisation or institution. Accountability cannot be

enforced without transparency and the rule of law.

Consensus oriented: There are several actors and as many view points in a given society. Good

governance requires mediation of the different interests in society to reach a broad consensus in

society on what is in the best interest of the whole community and how this can be achieved. It

also requires a broad and long-term perspective on what is needed for sustainable human

development and how to achieve the goals of such development. This can only result from an

understanding of the historical, cultural and social contexts of a given society or community.

Equity and inclusiveness : A society’s well being depends on ensuring that all its members feel

that they have a stake in it and do not feel excluded from the mainstream of society. This

requires all groups, but particularly the most vulnerable, have opportunities to improve or

maintain their well being.

Rule of Law: Good governance requires fair legal frameworks that are enforced impartially. It

also requires full protection of human rights, particularly those of minorities. Impartial

enforcement of laws requires an independent judiciary and an impartial and incorruptible police

force. (OECD, 2001)

1.2 Research Design and Methodology

This paper is an effort to discuss various factors associated with e-governance impacting

corporate governance. This paper presents and analyses various dimension of e-governance

linked to corporate governance in India. The present study utilises secondary data which was

collected from websites of different organisations, books, magazines and journals. To render the

crux of the study more precise, useful and focused the secondary data is gathered carefully.

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1.3 Types of E-Governance Relationships and ICT Initiatives

E-governance is the application of Information and Communication Technology (ICT) for

delivering efficient government services, exchange of information communication transactions,

integration of various stand-alone systems and services between government-to-citizens (G2C),

government-to-business (G2B), government-to-government (G2G) as well as back office

processes and interactions within the entire government framework. The term ‘Governance’ is

wider and subterranean than Government. Governance may be an activity of for controlling of

an organisation or a company by its CEO or Board of Directors. Moreover e-governance may

also involve governing of a country, organisation, company or a unit for providing better

facilities. The crucial aspect of today’s governance is empowering people. Since most of the

utilities and core services are in the hands of government they set a model for private sector.

Effective governance regulates flow of information between the government and citizens,

government and businesses and government and government. E-governance also helps in

regulating all these flows or relationships as follows:

A. Government to Citizen: The G2C includes the services provided by the government to the

citizens public utility services i.e., Telecommunication, Transportation, Post, Medical facilities,

Electricity, Education and also some of the democratic services relating to the citizenship such as

Certification, Registration, Licensing, Taxation, Passports and ID Cards etc.

B. Citizen to Government: Citizen to government relationship will include the communication

of citizens with the government arising in the democratic process like e-voting, campaigning,

feedback, etc.

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C. Government to Government: G2G relationship would include the relationships between

Central and State Government and also the relationship between two or more government

departments.

D. Government to Business: Our major concern for this study is government to business

relationship because it is directly influencing corporate governance practices. Ministry of

Corporate Affairs initiated MCA21 plan for providing access to stakeholders.

Electronic Corporate Governance (ECG):

This is a unique project initiated by Indian government for electronic corporate governance.

Providing access to citizens/stakeholders (G2C services) under section 610 of the Companies

Act, 1956 allows inspection of documents kept by the Registrars of Companies by the various

stakeholders on payment of statutory fees. After the implementation of MCA 21, this has become

history in the field of Indian corporate governance. Presently, nearly 5 crore pages of legacy

records consisting of permanent documents of companies (MOA, AOA, subsisting charge and

other documents) and Annual Returns and Balance Sheets for a period of two years preceding

have been scanned, digitized and made a part of the MCA 21 electronic registry. The project also

initiated e-filing of all the documents, e-forms and maintenance of electronic records in various

registries with effect from the dates of roll-out of the programme and further mandated for the

entire country from September 16, 2006.

According to MCA21 companies are required to edge with the Registrar of Companies (ROCs),

the Regional Directors (RDs) and the Union Government in accordance with various provisions

of the Companies Act. Earlier all filings by the companies were in physical paper mode requiring

a stakeholder or his representative to physically visit these offices or send the same by post.

Under MCA 21, various Forms have been re-engineered and converted into Electronic Forms (e-

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forms) to make them compatible with the e-governance processes. The e-forms have been

designed with the in-built “pre-fill” feature whereby the data in the required fields is captured

from the database available in the electronic registry in an automated manner. In addition to the

conventional challan-based off-line payment system in the pre-MCA 21 system, online payment

systems have been introduced, including use of digital signatures based on a Director

Identification Number (DIN) database. These services are now available on a 24 X 7 X 365 time

frame. The outcome is that record management is automatic, digital records have largely

replaced paper records and manual work also there is no question of ante-date filings, loss,

damage or substitution of documents. Elements of speed, certainty and integrity in filing of

documents are in place.

The architecture of MCA 21 has been designed to meet future challenges and scalability so that

corporate governance practices may become more speedy and transparent in largest democracy.

It is capable of sharing information with other Government Departments/ Ministries/ Regulators

in the corporate sector and introduction of joined-up services in due course. Presently, free

access to company documents having been allowed to the following organisations; Reserve Bank

of India, Financial Intelligence Unit (FIU-IND), Department of Economic Affairs, Intelligence

Bureau and Central Statistical Organisation. Access has been permitted to designated officers in

these offices through a secure DSC based login. Once the other Departments implement their e-

Governance programmes, and the NSDG develops the national Gateway, the MCA 21 system

can be linked with more organisations. Apart for MCA21 initiative, Corporate Governance Code

and Clause 49 some parallel changes in apprehensive areas are also instigated for electronic

corporate governance as discussed in next paragraph. In order to fulfill these records companies

are maintaining their websites user friendly and more secure.

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1. E-Taxation - Corporate sector pays many taxes, duties and dues to the Government.

Payment of these taxes and duties will be made easier by E-Taxation. Online taxing and

online payment of taxes can help reduce cost and time required for physical submission

of taxes. The refund, adjustments and traces are also possible online. ICT can also help

crosscheck the frauds and deficiencies in payment, further bringing accuracy and revenue

to the Government. In 2005-06 more substantial electronic transactions were introduced

through the income tax website. Presently 19 services are offered through the online

system including but not limited to: preparation and filling of income tax returns and

TDS (Tax Deductible at Source) returns by tax deductors, filing and tracking of PAN

(Permanent Account Number) /TAN(Tax deduction & collection Account) applications,

status enquiry of taxes paid in banks etc.

2. E-Licensing - Companies have to acquire various licenses from the Government,

similarly the companies have to acquire various registrations. ICT enablement of the

licensing and registration can reduce time and cost. Various mandatory data capture

forms are available for these purposes and could be submitted online. On the other side

many business requires much of documentation such as export and import. Therefore, e-

licensing and registration needs to be hassle-free and faster for improving efficiency.

3. E-Tendering - E-Tendering will include the facilities of online tendering and

procurement. It will give online alerts as to new opportunities of business with the

Government and also online submission of tenders and online allotment of work. It will

reduce time and cost involved in the physical tendering system.

4. E-conference and e-voting - Participation of directors at Board Meetings has been

permitted by the bill through videoconferencing or other audio visual means, provided

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 such participation is capable of recording and recognizing. Also, the recording and

storing of the proceedings of such meetings should be carried out. The Bill says that the

Central Government may prescribe the class or classes of companies and manner in

which a member may exercise his right to vote by the electronic means.

5. E- documentation – The Companies Bill, 2011 was presented in LokSabha on 14th

December 2011. The highlight of the bill was introducing technological advancements

and practical realities in electronic governance. The Bill proposes E-Governance for

various company processes and functions like maintenance and inspection of documents

in electronic form, option of keeping of books of accounts in electronic form, financial

statements to be placed on company’s website, holding of board meetings via video

conferencing/other electronic mode; voting through electronic means. The Companies

Bill proposes also allowed inspection of documents in electronic form and submitting

online documents or forms.

1.4 Prominent MCA21 initiatives

The Project was launched on 18th Feb, 2006 at Registrar of Companies office at Coimbatore, the

first pilot location and a second major pilot was launched at ROC Delhi after one month.

MCA21 system has been serving as the operational backbone to the process of MCA service

delivery at the ROC offices. An average of 1.7 million portal hits per day is registered and about

34 lakh documents have been filed electronically so far. About 85,000 new companies have been

registered using the newly introduced secure electronic services and 5 lakh users have viewed

company documents online from the registry. Key services that can be availed through the

MCA21 portal are downloading of e-forms; registration and incorporation of new companies;

annual and event-based filings, payment of penalty & fees and tracking the status of payment

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processing; viewing, creation and modification of index of charges, online registration, tracking

and redressal of investor grievance; and viewing and obtaining certified copies of public records

pertaining to companies.

Other services can be availed through the MCA21 Portal via the Internet from home or office, a

mode of delivery termed as the Virtual Front Office (VFO) or from facilitation centers known as

Physical Front Office(PFO). 53 facilitation centers have been set up by the Ministry while

professionals have been authorized to set up another 550 Certified Filing Centers (CFCs) across

85 towns and cities. While the PFOs set up by the Ministry provide services without any charge,

availing services at CFCs entails payment of a nominal prescribed fee.

The technical aspects of MCA 21 cover the following areas:

i. Design and development of application system

ii. Setting up of IT infrastructure

iii. Setting up the Digital Signature/PKI delivery mechanisms and security requirements

iv. Setting up of Physical Front Offices (PFOs)

v. Setting up of temporary FOs for the peak periods

vi. Migrating legacy data and digitization of paper documents to the new system

vii. Providing MCA services to all MCA 21 stakeholders

viii. Providing user training at all levels and all offices (Front and Back Offices).

Good Governance Before e-Governance: Adding the 'e' can make good governance better and

bad governance worse. This provides an argument for not considering the promotion of ICTs as a

goal in itself. ICTs must be integrated with, and driven by broader governance objectives. Whilst

recognising that ICTs can be valuable lever to reform we must consider governance objectives as

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the starting point, using ICTs as a means to those ends not as an end in themselves. ICTs will be

one key tool in helping meet the need for reengineered information systems the governance

reform demands. Many developing countries are still far behind a normative framework in terms

of good governance. Many states lack stable polities; many lack macro-economic stability; in

many, rule is by personalised leadership with rule by the executive branch that largely

marginalises the legislature and judiciary; there are social cleavages along ethnic, tribal and other

lines. In this context, the potential for e-governance initiatives to make a significant difference

may well be limited. However, that is not a rationale for inaction, and one must recognise that

ICTs can act as a relatively concrete lever to change. (Heeks, 1999)

1.5 Barriers in Corporate Governance

The basic need for e-corporate governance arose due to demand of good governance,

establishing ethical business organisation and agency costs. The paper places a particular

emphasis on the potential contribution of donor agencies to such an Initiative. Principles,

impacts, risks, priorities and other issues relating to e-governance initiatives are also described.

These are various obstacles in achieving good governance in our country discussed briefly:

Integration of Cost, Time and Security Concerns: The issues (Cost, Time) of integration of

legacy systems comes onto the scene as the information collected by governments may be

politically sensitive, installation of appropriate security mechanisms may be an important

technical consideration. At the same time, many other policy issues need to be resolved, such as

authentication and confidentiality.

Technical Complexities: IT infrastructure and cyber laws are the backbone of e-governance.

Interoperability with existing software and hardware platforms is a key success factor. It is

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unlikely that available resources can support a full replacement of existing application. Hardware

should be fully compatible with future technologies as well.

Infrastructure: Social, geographical and economical disparity issues have to be removed and

proper infrastructure is required to establish e-governance. The ICT facilities need to be

developed and should be available to one and all citizenry. Internet connection through satellite,

phone lines or through cable or Television should be accessible for all specially to the people in

rural areas.

Accessibility: Any service should be accessible by anybody from anywhere at any time who is

concerned with it. Even if Internet population is exponentially growing in India, still there is a

significant portion of the people who may not be able to access services for various reasons like

limited access to ICT technologies and devices, low literacy, or phobia for Computer etc.

Therefore, universal access is still a mirage because of security and other legal issues.

Implementation: A reconceptualization of government services is mandatory for unsuccessful

implementation and to get social acceptance. This will happen only if government processes will

be organised for citizens’ convenience instead of the convenience of the government.

Investment and cost: Economical issues are mainly concerned with return of investment and

safeguard of the previous ones. Cost of implementation, operational and evolutionary

maintenance must be low enough to guarantee a good cost/benefit ratio.

Maintenance: Maintenance of ICT is a key success factor for long living systems in rapidly

changing technical regularity environment. A well skilled labour force and strong will is need of

the hour for timely and regular maintenance.

1.6 Conclusion

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India also experienced some financial scams such as in LIC during 1950s. In eighties, nineties

and post 2001 periods such as Mudhras scam involving LIC, Raj Sethia scandal involving PNB,

Harshad Mehta case involving UTI, SBI and other institutions, Ketan Parekh’s fraud involving

Bank of India and Gujrat Cooperative Bank, Telgi’s Stamp Paper Scam , Global Trust Bank’s

scam, in the recent past major corporate poor governance by Satayam Computers deteriorated

Indian economy. Against the above backdrop and also based on the experience of UK and USA,

a number of committees were set up in India to study and examine the causes of such scams and

suggest effective measures for improving the corporate governance rules and practices for the

companies operating in India. The Cadbury Report also generated a lot of interest in India. The

issue of corporate governance was studied in depth and dealt with by the Confederation of Indian

Industries (CII), Associated Chamber of Commerce and Industry (ASSOCHAM) and Securities

and Exchange Board of India (SEBI). These studies reinforced the Cadbury Report’s focus on

the crucial role of the Board and the need for it to observe a Code of Best Practices.

In the years to come, the Indian financial system will grow not only in size but also in

complexity as the forces of competition gain further momentum and financial markets acquire

greater depth. For governing a largest democracy we need to implement successful e-corporate

governance strategies. E-corporate governance is an evolutionary phenomenon, and requires a

change in the mindset of one and all – citizen, executives or the government. Security is the

main concern for the stakeholders and citizen while redefining rules and procedures, information

transparency, legal issues, infrastructure, skill, awareness, access to right information, inter-

departmental collaboration, tendency to resist the change in work culture etc.

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