Chapter 2 examines business organizations in India before the arrival of the British East India Company, focusing on the sreni, an organizational entity primarily engaged in business and commerce that flourished in the subcontinent for almost two millennia (800 BCE to 1000 CE). Study of the sreni is warranted not only because of its use across a long and understudied span of history, but because its development sheds light on factors identified as relevant to the development of European business organizations, such as increasing trade, the need to contain agency costs, and methods to engage in asset partitioning and entity shielding. The history of the sreni shows sophisticated attempts to address agency costs and incentive effects, as well as considerable agility in adapting to changing business conditions. And, Vic Khanna shows, while the sreni faded after 1000 CE, it had lasting effects on business in the subcontinent and may have impacted Mughal institutions in ways that had important repercussions for later economic growth.
This chapter reviews the empirical literature on the factors related to the likelihood and detection of corporate wrongdoing, which increasingly focuses on internal governance, and examines calls to split the traditional tasks of the General Counsel (GC) between the GC and a Chief Compliance Officer (CCO) who reports directly to the Board. The reason for this is to have more independence and expertise in compliance matters than the GC’s office traditionally provides. This chapter argues that although independence is often valuable in reducing wrongdoing, in this context it is likely to come with additional costs that may make gathering information on wrongdoing more difficult. In particular, some employees may be more reluctant to provide information to a CCO than to the GC, and this might sometimes result in increased wrongdoing and weaker operating performance. These deleterious effects, however, might be somewhat ameliorated by institutional and governance design adjustments. This chapter examines what factors may drive likely outcomes and finds that further empirical inquiry would be valuable and suggests some ways in which future research might engage in this inquiry.