Page 85 - NITI - Navigating Indian Traditions in Industry

resonates strongly with modern governance principles. His teachings highlight the
necessity for leaders to establish clear rules for operations, be transparent in decision-
making, and hold individuals accountable for unethical conduct. This approach to
governance extends beyond political spheres to influence corporate structures today,
where principles of transparency, accountability, and responsible decision-making are
critical.
The Arthashastra (1.19) states:

“A ruler should always ensure that there is no conflict of interest in governance and
business practices, maintaining ethical standards.”

This teaching highlights the need for a separation between personal interests and
official duties—an idea that is foundational to modern corporate ethics. The concept
of avoiding conflicts of interest has become a cornerstone of corporate governance,
particularly with regard to the roles of board members and executives.

5.1.2 Modern Laws Derived from the Arthashastra:

The principles articulated in the Arthashastra directly influenced the development
of modern corporate governance laws, both in India and internationally. Many
contemporary laws emphasize the importance of transparency, accountability, and
the avoidance of conflicts of interest, mirroring the teachings of Kautilya.
Companies Act, 2013 (India): This legislation mandates that businesses adhere
to ethical practices in governance. It requires companies to maintain a system of
internal controls, independent directors, and clear audit trails to ensure transparency
and accountability. Specifically, it addresses issues such as director duties, conflicts of
interest, and ethical conduct in corporate management, much in the spirit of Kautilya’s
instructions on leadership ethics.
Example: 1

Section 166 of the Companies Act, 2013 outlines the duties of directors, including
the duty to act in good faith, with due diligence, and to avoid situations where
personal interests conflict with the interests of the company. This directly reflects the
Arthashastra’s emphasis on ethical governance and conflict-free decision-making.

Corporate Governance Codes: Modern corporate governance codes, such
as the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,
are also rooted in the teachings of transparency, accountability, and conflict-of-
interest management. These codes require companies to have independent boards,
implement auditing mechanisms, and disclose financials transparently, ensuring that
business practices are aligned with ethical standards.

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