Confronting the Paper Tiger: Pluralism in India’s Corporate Jungle

Amidst the conundrum of determining which model of corporate governance is ideally suited for companies, India has adopted the pluralistic model as a guiding principle of company law. Enshrined in Section 166(2) of the Companies Act, 2013, the pluralistic approach recognises the multi-fiducial duties of directors towards various stakeholder interests and places them on par with the interests of shareholders. The significance of the pluralistic approach is vast - its legal codification recognises and takes into account stakeholder interests without creating a hierarchy. Further, the model is closely tied to the concept of Corporate Social Responsibility (CSR) and aligns with the constitutional ideal of a pluralistic society. While the pluralistic approach is important in principle and notable in theory, its practical application suffers from various loopholes which renders it a paper tiger in the law. In addition to highlighting prevailing arguments of ineffective implementation, lack of redressal for stakeholders and ambiguity in the language of the provision, this paper aims to focus on the three main agency problems in companies which undermine the purpose and efficacy of the pluralistic approach as outlined in Section 166(2). Further, these lacunae can lead to a neglect of overall company benefit and promote unscrupulous practices that prioritise individual interests as evidenced by real world instances and case precedents. Therefore, there is a pressing need to formulate fine-tuned solutions so as to plug the prevalent loopholes in the pluralistic model, until which time the quest for perfection remains.