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Given below keynote address by Dr.

Bimal Jalan, which has caught attention of many

on Ethical Value Added to Corporation.

Just wanted to share with all of you.

It's important to go back to business ethics: Dr. Bimal Jalan

The following are the edited transcripts of RBI Governor Dr. Bimal Jalans keynote
address at the Business Today Corporate Governance Summit held in Mumbai. The
Summit, sponsored by the Tata Group, included the keynote address by Dr. Jalan
and a panel discussion on the topic by Adi Godrej, MV Kamath and Joel Stern.

"I am really very happy to be here to release The Annual survey of Indias Wealth
Creators, many of whom happen to be present here today. "

"It is also very important to my mind that the occasion happens to be releasing the
concept of wealth creation in terms of EVA and MVA (the Economic Value Added and
the Market Value Added) concepts which are certainly much more valid in trying to
assess the contribution of enterprises to a countrys income or a countrys wealth
rather than net earnings which are normally used for market capitalization which is a
concept that we use day to day. "

"So in any assessment of the contribution of the corporate sector to our countrys
growth the use of capital, I think what it measures really is the efficiency with which
you are using your capital both in terms of market prices as well as in terms of what
is referred to as the economic prices. So the concepts are extremely valid. "

"The importance of the subject for India can hardly be exaggerated because we are
in a period of transition from the old methods of doing things to the new methods of
doing things, from family oriented business enterprises to much more professional
enterprises, to a less competitive, better tuned closed system to an open system. So
the importance of Corporate Governance in making this transaction is more
important, more urgent in our kind of a country who has well-established industrial
societies. "

"It has become very urgent and a very contemporary thing to talk about after the
recent debacles of governance in some of the best known corporate in the United
States, more recently in the U.K. and Europe as well. "

"The Stock Exchange authorities in the United States as well as in the rest of the
world are also busy trying to evolve new standards of disclosure, accountability,
accounting, auditing rules, placing greater responsibilities on the individuals for the
accurate depiction of the state of finances and I am sure the concept that you are
talking about, of the EVA and the MVA and the kind of contribution that you have
made could form an important part of the whole business of disclosing the real state
of a company or a corporation. "

"The different kinds of Corporate Governance models are also being debated, I think
all across the world today. India is an economy in transition - as a competitive
economy that is moving fast to becoming an industrial society. In becoming an
important partner in trade and finance with the rest of the world, I hope that we will
distill the best conclusions from this Corporate Governance Summit. "
"Structure is important, CEOs responsibility is important, the shareholders
accountability to the market is important, the disclosure norms, auditing are
extremely important. But the point I want to make to you that above all there is
another attribute to Corporate Governance, which doesnt receive that, much
attention as it should. That is Ethics. Ethics cannot be captured in the structure or in
the published balance sheet, but I am sure that you know it when you see it. "

"What does it represent? It represents in the corporations, to my mind, a respect not

only for the law as it is written, not only for the accounting roles, rules as they are
published but what is behind it that is the sanctity of contracts, sanctity of
truthfulness, all the rules that you see, the structures you see, are ultimately
designed to promote an ethical conduct on the part of the corporations. "

"Customer Service for example, is not only connected with sales, it has also some
thing to do with your service which cannot be captured in the structures and rules
and accounting rules. All of us say it is lip service, but we have to look at it that
whether you are dealing with your customers in ethical way, whether you are dealing
with your contracts in ethical way, whether there is truth and trust among your
suppliers and among your buyers in regard to money and goods. "

"In Accounting, you can lay down any number of rules but if you ask four
accountants you will find that they will give a different treatment of, for example, of
Receivables. What is a Receivable, what is not a Receivable, what is due and what is
not Due and what should be shown in the balance sheet ultimately is a question of
ethics, what you think is right and if you tell your accountant that what you think is
right then you believe in it. "

"Ethical conduct is not an emotional thing or a sentimental thing. It is in the interest

of the corporation. If you look at the corporations, which over a period of fifty years
or hundred years have done well, you will find that they are known for their ethics
even today."

"I think we are passing through a transitional phase and where it is the important to
go back to the business ethics. To my mind that is probably the best value added. I
would put ethics as the Ethical Value Added, which is probably the most important
value, added that a CEO (Chief Executive Officer) could gift to his corporation. And if
he does, then the other EVA (Economic Value Added) and the MVA (Market Value
Added) to my mind will follow. Thank you for having me here once again and giving
me an opportunity to share some views with you. Thank you very much.