Law can only provide a minimum code of conduct for proper regulation of human being or company. Law is made not to stop any act but to ensure that if you do that act, you will face such consequences i.e. good for good and bad for bad. Thus, in the same manner, role of law in corporate governance is to supplement and not to supplant. It cannot be only way to govern corporate governance but instead it provides a minimum code of conduct for good corporate governance. Law provides certain ethics to govern one and all so as to have maximum satisfaction and minimum friction. It plays a complementary role. Role of law in corporate governance is in Companies Act which imposes certain restrictions on Directors so that there is no misrepresentation of documents, there is no excessive of power, so that it imposes duty not to make secret profit and make good losses due to breach of duty, negligence, etc., duty to act in the best interest of the company etc.
4.4.4 Perspectives of corporate governance
Mainly we will deal with the perspectives of corporate governance from three points of view:
1. Shareholders (Capital Market) – Providers of a risk capital have final control on resource allocation decisions
2. Organization (Management) – Main purpose is to control i.e. through skills, intelligence, innovation, ideas, professionalism etc. Therefore, here in this perspective, resource allocation decision should rest with them
3. Stakeholders – for long term business, only shareholders value maximization should not be seen as sole goal but it should be for wellbeing of all groups with stake of long run of business and it should be goal of corporate governance.