IMPACT OF TECHNOLOGY AND DIGITIZATION ON CORPORATE

GOVERNANCE AND ETHICS

The impact of technology and digitalization on corporate governance and ethics is a complex and
rapidly evolving topic that has become increasingly relevant in today's business landscape. Advances
in technology have revolutionized the way businesses operate and interact with stakeholders, but have
also presented new ethical and legal challenges.

From the use of AI and big data to cybersecurity and data privacy, companies must navigate a wide
range of issues related to technology to maintain a strong culture of corporate governance and ethics.
Failure to do so can result in reputational harm, legal liability, and loss of stakeholder trust.

To address these challenges, companies must adopt a proactive approach that prioritizes responsible
and ethical use of technology. This includes staying informed about legal developments, taking steps
to protect sensitive information, and promoting diversity and inclusion in the development and use of
technology. Ultimately, by embracing the opportunities and challenges presented by technology,
companies can build a strong foundation for sustainable growth and success.

Introduction
In recent years, the rapid pace of technological advancement has had a profound impact on all aspects
of society, including business and corporate governance. Digitalization has changed the way
companies operate, communicate, and interact with stakeholders.

However, with the rise of new technologies, new ethical dilemmas and governance challenges have
also arisen. This article will explore the impact of technology and digitalization on corporate
governance and ethics, including the potential benefits and risks associated with these developments.

Benefits of Technology and Digitization on Corporate Governance

The use of technology in corporate governance has the potential to improve decision-making, increase
transparency, and promote accountability. For example, digital tools and systems can automate many
administrative tasks, reducing the workload of directors and executives and freeing up time for more
strategic work. In addition, digital systems can provide real-time access to data and information,
enabling faster and more informed decision-making.
This can be particularly beneficial in large organizations, where decision-making can be slow and
bureaucratic.

Another key benefit of technology and digitalization in corporate governance is increased

transparency. For example, digital systems can provide stakeholders with access to real-time
information about a company's operations, financial performance, and management. This can help to
promote accountability and reduce the risk of fraud or mismanagement. In addition, digital tools can
be used to monitor and audit corporate activities, further reducing the risk of unethical or illegal
behaviour.

Digitalization can also improve the efficiency of corporate governance processes. For example,
electronic voting systems can enable quicker and more efficient voting, while digital communication
tools can improve communication between directors and stakeholders. This can help to speed up
decision-making and reduce the risk of conflicts and disputes.

Risks associated with Technology and Digitization on Corporate Governance

Despite the potential benefits, technology and digitalization in corporate governance also pose several
risks and challenges. One of the main risks is cybersecurity. As more and more information is stored
and transmitted electronically, the risk of data breaches, hacking, and other forms of cybercrime
increases. This can have serious consequences for companies, including loss of sensitive information,
damage to reputation, and financial losses.

Another risk associated with technology and digitalization in corporate governance is the potential for
bias and discrimination. For example, algorithms used in decision-making systems may be biased
toward specific groups, leading to unequal treatment and discrimination. In addition, the use of
technology in recruitment and selection processes can also lead to bias, as algorithms may be
designed to favour certain candidates based on their characteristics or previous experience.

The use of technology in corporate governance can also lead to a loss of privacy for directors and
stakeholders. For example, the use of electronic voting systems and digital communication tools may
enable companies to collect and store large amounts of personal information, which can be vulnerable
to unauthorized access or misuse.

In addition, using technology in monitoring and auditing processes can also lead to a loss of privacy
for employees and stakeholders, as companies may be able to access and use personal information for
non-business purposes.

Furthermore, to ensure that the technology and digitalization adaptation in corporate governance is
used ethically and responsibly, it is important as well as pivotal for companies to establish clear
policies and guidelines. These should include provisions for protecting personal information,
preventing discrimination and bias, and addressing cybersecurity risks. In addition, companies should
regularly review and update their technology policies to ensure that they remain relevant and effective
in the face of new developments and challenges.

Another key step in ensuring the ethical and responsible use of technology in corporate governance is
to involve stakeholders in decision-making processes. This can help to promote transparency.

The legal perspective of Technology and Digitization on Corporate Governance

The legal perspective on the impact of technology and digitalization on corporate governance and
ethics are shaped by existing laws and regulations, as well as evolving legal frameworks that are
designed to address new challenges posed by digital transformation.

In terms of corporate governance, technology has given rise to new legal considerations related to the
use of digital tools and systems. For example, companies must comply with data protection laws, such
as the General Data Protection Regulation (GDPR) in Europe, when collecting, storing, and using
personal information. In addition, companies must comply with cybersecurity regulations, such as the
Cybersecurity Information Sharing Act (CISA) in the United States, to ensure that sensitive
information is protected from cyber threats.

Regarding ethics, the use of technology in corporate governance has also raised legal questions about
discrimination, bias, and privacy. Companies must comply with anti-discrimination laws, such as the
Equality Act in the United Kingdom, to ensure that their technology systems do not perpetuate or
amplify existing biases or lead to unequal treatment. In addition, companies must comply with
privacy laws, such as the California Consumer Privacy Act (CCPA) in the United States, to protect the
personal information of employees and stakeholders.

Finally, the legal framework around corporate governance and ethics is constantly evolving to keep
pace with technological advancements. For example, many countries are considering new laws to
regulate the use of artificial intelligence (AI) in business, including ethical considerations around bias
and discrimination. Companies must stay informed about legal developments in this area and be
proactive in adapting to new legal requirements.

In conclusion, the impact of technology and digitalization on corporate governance and ethics is
complex and multifaceted. Companies must be aware of the legal implications of their use of
technology and take steps to ensure that their technological systems comply with existing laws and
regulations. By doing so, they can promote responsible and ethical use of technology in corporate
governance and reduce the risk of legal liability.

What does Morality have to say in the adaptation of Technology and Digitization on Corporate
Governance?

From a moral and humanitarian point of view, the impact of technology and digitization on corporate
governance and ethics is a problematic issue that needs to be considered. On the one hand, technology
has the prospective capability to enhance ethical behaviour in corporations by providing greater
transparency, accountability, and access to information. For example, blockchain technology can be
used to create a transparent and tamper-proof record of transactions, which can promote
accountability and reduce the risk of fraud.

On the other hand, technology can also present new ethical challenges that may undermine corporate
governance and ethics. For example, the use of AI and automation can result in job displacement,
which can have negative social and economic consequences. Similarly, the use of big data and
predictive analytics can raise ethical concerns related to privacy, surveillance, and discrimination.

To address these challenges, companies must adopt a moral and ethical framework that guides their
use of technology. This includes recognizing the potential impact of technology on employees,
customers, and other stakeholders, and taking steps to ensure that the benefits of technology are
distributed fairly and equitably. Companies must also adopt a culture of transparency and openness,
which promotes ethical behaviour and reduces the risk of misconduct.

Finally, companies must recognize that technology is not a panacea for ethical challenges in corporate
governance. Rather, technology should be used as a tool to enhance ethical behaviour, but not as a
substitute for moral and ethical judgment. By adopting a morality-based approach to technology and
digitization, companies can build a strong culture of corporate governance and ethics that promotes
responsible and sustainable growth.

India's perspective in lieu with the Companies Act, 2013

India's perspective on the impact of technology and digitization on corporate governance and ethics is
shaped by the country's unique economic and cultural context. India is home to a rapidly growing tech
sector, which has been driving innovation and growth across a range of industries. However, the
country also faces significant challenges related to corruption, regulatory compliance, and ethical
conduct in business.

One of the key areas where technology is having an impact on corporate governance and ethics in
India is the area of data privacy and security. With the growth of e-commerce and digital transactions,
the Indian government has introduced new regulations such as the Personal Data Protection Bill,
which seeks to protect the privacy of individuals and promote responsible data handling practices.

Another area of concern is the ethical use of artificial intelligence (AI) and automation in business.
With the increasing use of AI and machine learning in decision-making processes, there is a risk of
bias and discrimination. The Indian government has taken steps to address this issue by introducing a
National AI Strategy that promotes ethical and responsible AI development.

India has also been a leader in promoting corporate social responsibility (CSR) as a means of
enhancing ethical conduct in business. The Companies Act of 2013 requires companies meeting
certain financial criteria to spend at least 2% of their net profits on CSR activities. This has led to
increased investment in areas such as education, healthcare, and environmental sustainability.

Overall, India recognizes the potential of technology and digitization to drive growth and
development but also acknowledges the need to address the ethical and governance challenges that
come with it. Through a combination of regulatory frameworks, CSR initiatives, and ethical business
practices, India is striving to create a business environment that promotes responsible and sustainable
growth in the digital age.

The Indian government has taken several measures to create a positive impact of technology and
digitization on corporate governance and ethics.

Some of these measures are highlighted below:

The primary measure is to enact the Data Protection Regulations, where the Indian government has
introduced the Personal Data Protection Bill, which seeks to protect the privacy of individuals and
promote responsible data handling practices. The bill will apply to both Indian and foreign companies
that process the personal data of Indian citizens.
To enhance transparency and accountability in the world of technology automation, the Indian
Government has established a Cybersecurity Framework where it has established a National Cyber
Security Policy, which provides guidelines and strategies for securing the country's cyberspace. The
policy includes provisions for critical information infrastructure protection, cyber incident response,
and capacity building.

In recent times, the banking sector has witnessed tremendous development where the Indian
government has promoted digital payments vigorously through initiatives such as the Unified
Payments Interface (UPI), which allows for easy and secure transactions between individuals and
businesses. This has helped reduce corruption and promote transparency in financial transactions.

The Indian government by taking fiscal responsibility has introduced a National AI Strategy that
promotes ethical and responsible AI development. The strategy includes provisions for creating a legal
and regulatory framework for AI, promoting research and development, and establishing centers of
excellence.

Corporate Social Responsibility:

The Companies Act of 2013 requires companies meeting certain financial criteria to spend at least 2%
of their net profits on CSR activities. This has led to increased investment in areas such as education,
healthcare, and environmental sustainability.

E-Governance:

The Indian government has promoted e-governance through initiatives such as the Digital India
program, which seeks to transform India into a digitally empowered society and knowledge economy.
The program includes provisions for digital infrastructure, digital literacy, and digital services in the
economy which highlights the progressive development

Comprehensively, we can proudly state that the Indian government recognizes the importance of
technology and digitization in promoting growth and development, but also acknowledges the need to
address the ethical and governance challenges that come with it. Through a combination of regulatory
frameworks, capacity building, and ethical business practices, the Indian government is striving to
create a business environment that promotes responsible and sustainable growth in the digital age.

Further, we move ahead by analyzing how the legislation enacted and amended by the Parliament I.e.
Companies Act, 2013 had a significant impact on technology and digitization on corporate
governance and ethics

The Companies Act, of 2013 recognizes the impact of technology and digitization on corporate
governance and ethics and includes several provisions that address these issues. Here are some
examples:

As per �108 of the Companies Act, 2013 r/w Rule 20 of the Companies (Management and
Administration) Rules, 2014, it has introduced a new provision termed 'E-voting' where the
Companies Act, 2013 mandates that listed companies and companies with more than 1000
shareholders must provide e-voting facilities to their shareholders. This enables shareholders to cast
their votes on resolutions electronically, thereby enhancing transparency and efficiency in decision-
making.

The Act permits companies to maintain their registers, books of accounts, and other documents in
electronic form, subject to certain conditions. This enables companies to adopt digital technologies for
record-keeping and reduces the burden of physical storage.

In addition to the same, the Act mandates companies to maintain an audit trail of all transactions that
are conducted through electronic means. This enables companies to track and monitor all electronic
transactions and enhances accountability and transparency in corporate governance.

�149(6) of the Companies Act, 2013, necessarily mandates that certain classes of companies must
have at least one-third of their directors as independent directors. This ensures that companies have a
diverse and independent board of directors, which can help to promote ethical decision-making and
good governance practices.

The Companies Act, 2013 u/s 135 mandates that certain classes of companies must spend a minimum
of 2% of their average net profits on Corporate Social Responsibility (CSR) activities. This
encourages companies to adopt socially responsible practices and contribute to the well-being of
society.

Overall, the Companies Act, 2013 recognizes the potential of technology and digitization to enhance
corporate governance and ethics and includes several provisions that promote transparency,
accountability, and ethical decision-making. By embracing these provisions, companies can leverage
digital technologies to improve their governance practices and build a culture of ethical behaviour.

Case Laws
There have been several high-profile and debatable case laws related to the impact of technology and
digitalization on corporate governance and ethics. These cases have shaped the legal landscape and
guided how companies should handle technology-related issues in the context of corporate
governance and ethics.

One of the most notable cases is Google v. Vidal-Hall, which was decided by the Court of Appeal in
the United Kingdom in 2015. This case involved allegations that Google was collecting and using
personal information in a manner that was incompatible with the rights of individuals under the Data
Protection Act 1998. The Court of Appeal held that individuals have the right to control their personal
information and that companies that collect and use personal information must comply with data
protection laws. This case set a precedent for data protection and privacy issues related to technology
and digitalization.

Another notable case is the Uber v. Waymo dispute, which was resolved in 2018. This case involved
allegations that Uber had misappropriated trade secrets from Waymo, Alphabet's self-driving car
subsidiary, to develop its autonomous vehicle technology. The case highlights the importance of
protecting intellectual property and ensuring that technology companies adhere to ethical standards in
their dealings with competitors.

A third example is the Equifax data breach case, which was widely reported in 2017. This case
involved a massive data breach that exposed the personal information of millions of individuals. The
case highlights the importance of cybersecurity and the need for companies to take appropriate
measures to protect sensitive information in the digital age.

Several Indian case laws have addressed the impact of technology and digitization on corporate
governance and ethics. Here are some examples:

In 2009, Satyam Computer Services, one of India's largest IT services companies, was involved in a
massive accounting scandal. The company's chairman had inflated the company's profits and assets by
creating fake invoices and accounts. The scandal highlighted the need for better corporate governance
and transparency in the use of technology in financial reporting.

In the case of Shreya Singhal v. Union of India, Supreme Court struck down Section 66A of the
Information Technology Act, which had been used to arrest individuals for posting critical comments
on social media. The court held that the provision was unconstitutional and violated freedom of
speech and expression. The case emphasized the need for ethical use of technology and the
importance of protecting individual rights in the digital age.
In the case of Reserve Bank of India v. Internet and Mobile Association of India, the Supreme
Court upheld the Reserve Bank of India's ban on cryptocurrency transactions in India. The court held
that the ban was necessary to protect the integrity of the financial system and prevent money
laundering and terrorism financing. The case highlighted the challenges of regulating technology and
the need for ethical considerations in the use of emerging technologies.

In the case between Tata Sons and Cyrus Mistry, where the dispute between the Tata Group and Cyrus
Mistry, the former chairman of Tata Sons, highlighted the importance of transparency, accountability,
and ethical governance in corporate organizations. The case raised concerns about the use of
technology for surveillance and unethical practices in the boardroom.

Concerning the above-cited authorities, these case laws demonstrate the need for ethical
considerations in the use of technology and the importance of transparency, accountability, and
governance in corporate organizations. They also highlight the challenges of regulating technology in
the digital age and the need for a comprehensive legal framework to address these challenges.

These cases further emphasize and examine that technology and digitalization can have a significant
impact on corporate governance and ethics, and that companies must be proactive in addressing legal
and ethical challenges related to technology. By staying informed about legal developments and
taking a responsible approach to technology, companies can reduce the risk of legal liability and
promote ethical behaviour in the digital age.

What do legal experts have to say on the impact of Technology and Digitization on Corporate
Governance?
Legal experts have varying opinions on the impact of technology and digitization on corporate
governance and ethics. Some experts believe that technology can greatly enhance transparency,
accountability, and governance in corporate organizations. For example, the use of blockchain
technology can enable secure and transparent record-keeping and transactions, which can reduce fraud
and corruption.

Other experts, however, warn of the potential risks associated with the use of technology in corporate
governance and ethics. For example, the use of algorithms and artificial intelligence (AI) in decision-
making processes can lead to biases and discrimination. Additionally, the use of technology for
surveillance and data collection can raise concerns about privacy and individual rights.

Many legal experts agree that there is a need for a comprehensive legal framework to regulate the use
of technology in corporate governance and ethics. This framework should address issues such as data
privacy, cybersecurity, accountability, transparency, and ethical considerations in decision-making.
Additionally, legal experts emphasize the need for ongoing training and education to ensure that
organizations and individuals are equipped to navigate the ethical and governance challenges posed
by technology and digitization.

All in all, the learned legal experts recognize the potential benefits of technology and digitization in
corporate governance and ethics, but caution that these benefits must be balanced against the potential
risks and challenges. A comprehensive legal framework that addresses these challenges can help to
promote the ethical and responsible use of technology in corporate organizations.

Here are some statements made by famous legal personalities on the impact of technology and
digitization on corporate governance and ethics:
Justice Markandey Katju, Former Judge of the Supreme Court of India, said, 'Technology has made
communication much faster and efficient. It has enhanced transparency and accountability in
corporate governance. However, it has also raised concerns about privacy and security, which need to
be addressed through a comprehensive legal framework.'

Mary Jo White, Former Chair of the US Securities and Exchange Commission, said, 'Technology can
greatly enhance corporate governance and ethics by enabling real-time monitoring and analysis of
financial data. However, it can also increase the risk of cyber threats and other security breaches,
which requires ongoing vigilance and proactive measures.'

Lord Jonathan Mance, Former Justice of the UK Supreme Court, said, 'The use of technology in
corporate governance and ethics is a double-edged sword. It can enable greater transparency and
accountability, but it can also create new risks and challenges. Legal frameworks need to keep pace
with technological developments and address these challenges.'

Nandan Nilekani, Co-founder of Infosys and former Chairman of the Unique Identification Authority
of India, said, 'Technology can enable greater transparency and accountability in corporate
governance and ethics, but it is not a substitute for ethical behaviour and good governance practices.
Companies need to prioritize ethical values and principles, and for legal frameworks to enforce them
effectively.'

On a case-to-case basis and situation, these statements reflect the complex and nuanced nature of the
impact of technology and digitization on corporate governance and ethics. While technology can offer
significant benefits in terms of transparency, efficiency, and accountability, it also poses new
challenges and risks that must be addressed through ongoing vigilance and proactive measures. Legal
frameworks have a critical role to play in ensuring that technology is used ethically and responsibly
and that corporate governance practices prioritize ethical values and principles.

Conclusion and Suggestions

In conjecture, it can be a well-settled statement that the impact of technology and digitization on
corporate governance and ethics is complex and multi-faceted. On one hand, technology has the
potential to greatly improve efficiency, productivity, and innovation in business operations. On the
other hand, it can also present significant challenges in terms of ethical decision-making,
cybersecurity, data privacy, and governance structures.

Organizations need to recognize the potential ethical and governance challenges posed by technology
and digitization and take proactive steps to address them. This can include establishing clear policies
and procedures for the development and implementation of technology, adopting ethical frameworks
and governance structures, promoting transparency and accountability, and investing in training and
expertise to ensure that technology is used ethically and responsibly.

Governments also have a crucial role to play in regulating the use of technology and digitization in
business operations. This can include developing comprehensive data protection regulations,
promoting cybersecurity and privacy, promoting digital literacy and infrastructure, and supporting
research and development of ethical and accountable technologies.

Ultimately, the impact of technology and digitization on corporate governance and ethics will depend
on how organizations and governments respond to these challenges. By adopting a proactive and
responsible approach, organizations can ensure that technology is used in a way that is ethical,
accountable, and sustainable, thereby promoting long-term success and growth.

In conclusion, here are some suggestions for how companies can navigate the impact of
technology and digitization on corporate governance and ethics:

1. Develop a comprehensive digital governance strategy:

Companies should develop a comprehensive digital governance strategy that outlines how
they will use technology to enhance transparency, efficiency, and accountability, while also
addressing potential risks and challenges.

2. Prioritize data privacy and security:

Companies should prioritize data privacy and security in their digital governance strategy, and
 adopt measures such as encryption, access controls, and employee training to ensure the
protection of sensitive information.

3. Foster a culture of ethical behaviour:

Companies should prioritize the development of a culture of ethical behaviour, by setting
clear ethical standards and expectations, promoting transparency and accountability, and
ensuring that employees are trained on ethical decision-making.

4. Embrace independent oversight:

Companies should embrace independent oversight, such as independent directors, external
auditors, and regulatory authorities, to ensure that their governance practices are aligned with
ethical principles and regulatory requirements.

5. Leverage emerging technologies for good governance:

Companies should leverage emerging technologies such as artificial intelligence, blockchain,
and analytics to enhance their governance practices, but should also ensure that these
technologies are used ethically and responsibly.

Through thorough analysis, it can be well understood that companies must be proactive and
thoughtful in navigating the impact of technology and digitization on corporate governance and
ethics. By prioritizing ethical behaviour, transparency, and accountability, companies can leverage
digital technologies to enhance their governance practices and build trust with stakeholders.