AI, multi-stakeholder focus to redefine corporate governance, says Sanjiv Mehta

The future of corporate governance is being shaped by two powerful forces: the rise of artificial intelligence in business operations and a broader move towards stakeholder-driven decision-making. According to Sanjiv Mehta, Executive Chairman of L Catterton India and former MD & CEO of Hindustan Unilever, these shifts demand a rethink of traditional frameworks.  

“As AI technologies reshape operations and decision-making, companies must establish robust governance frameworks to ensure ethical use, data privacy, risk mitigation, and transparency — potentially through dedicated AI governance committees,” Mehta said.  

He also emphasised that the traditional shareholder-first mindset is giving way to a more inclusive model — one that values the interests of employees, customers, communities and the environment.

Speaking at the Corporate Governance Scores event hosted by Institutional Investor Advisory Services on April 11, Sanjeev Mehta noted that while corporate governance in India has evolved, persistent gaps remain. He stressed the need for structural and cultural reform beyond policy tweaks.

Mehta pointed to insider trading as a lingering problem fueled by weak enforcement, saying it continues to erode investor trust and market integrity. “Strengthening corporate governance in India now requires not just new rules, but better execution, through stricter regulatory action, more diverse and independent boards, and greater alignment with ESG principles,” he said.

A key concern, he added, is the lack of true board independence. “Although regulations mandate the presence of independent directors, many boards continue to be dominated by promoters or majority shareholders, compromising objective decision-making,” Mehta said.

He also raised questions about how independent directors are chosen. “The selection process for independent directors is often non-transparent, raising concerns about their true autonomy and effectiveness in holding management accountable. This undermines trust in governance systems and limits the board’s ability to function as an effective check on executive power,” he warned.

Another area needing attention is disclosure. Despite existing rules under the Companies Act and SEBI, Mehta said compliance often falls short. Companies delay financial reports, disclose little about related-party transactions, and share minimal details on executive pay. He noted that enforcement bodies often lack the capacity or authority to demand strict adherence.

Corporate social responsibility is another weak spot. Mehta said many companies treat CSR as a box-ticking exercise instead of integrating it into their business strategy. “A genuine commitment to CSR, embedded into the core strategy, is still missing in many cases,” he observed.

Diversity and stakeholder engagement are also lacking. Board representation for women and other underrepresented groups remains low, limiting diverse viewpoints. At the same time, companies often chase short-term gains at the expense of long-term stakeholder relationships.

With customer awareness on the rise, Mehta said companies must rethink what sustainability means in practice. “Sustainability shines brightest when backed by strong business performance — the true impact is not achieved through optics or trends, but through authenticity, purpose, and a willingness to lead with values,” he said.  

He added, “In a world demanding accountability by informed customers, companies must align profitability with principles, proving that doing good and doing well are not just compatible, but inseparable.”