CHAPTER – 11

CONCLUSIONS AND SUGGESTIONS

Corporate Governance has been a central issue in developing countries long

before the recent spate of corporate scandals in advanced countries. Corporate
Governance gained tremendous importance due to economic liberalization and
deregulation of industry and business, as well as the demand for a new corporate ethos
and stricter compliance with the law of the land. Another important factor that has been
responsible for the sudden exposure of the corporate sector to a new paradigm for
corporate governance in tune with the changing times is the need and demand for greater
accountability of companies to their shareholders and customers.

Although relatively, it a new concept which was noticed all over the world after
Sir Adrin Cadbury submitted its recommendations in 1992, but the concept of Corporate
Governance is becoming popular very fast not only in the developed countries but also in
the developing countries for variety of reasons. Developments in the field of information
technology is creating seamless countries where businesses are gradually going out of the
control of their respective Governments but is being controlled more through
international norms and ethics. Corporations have to bother about compliance of good
Corporate Governance practices to build up their positive and favorable image which is
not only becoming desirable but has become essential for its future growth, expansion
and diversification plans. Be it market expansion or deeper market penetration or raising
of funds through foreign markets or listing of its shares on the stock exchanges of
different countries to win over the confidence of the overseas investor, compliance with
good Corporate Governance practices by it are the pre-condition for the same.

In India, corporate governance had not been well-understood up to the early

1990s. The financial institutions which were mostly government owned and controlled,
never monitored the loans or came in the way of any management and virtually never
divested their ownership stake in any firm. There were also constraints on monitoring by
external capital markets. With the liberalization of the economy, several positive
developments occurred on the corporate governance front. First, The Securities and
Exchange Board of India Act, 1992 created a regulatory body with the explicit mandate
to improve the functioning of Indian financial markets. Second, the state-run financial
institutions were given incentives for better performance and a free hand to monitor their
loans. Competition among the financial institutions increased with the deregulation of
interest rates and the gradual elimination of consortium requirements. Private sector
mutual funds were allowed to compete with the state monopoly. Third, a takeover code
was introduced in late 1994. Fourth, restrictions on the entry of foreign investors were
eliminated and regulations on their investments were substantially clarified. All these
developments threw the domestic corporations open to external competition. The
pressure to compete globally in turn put pressure to follow internationally accepted norms
of corporate governance.

Corporate Governance is a process or a set of systems and processes to ensure that

company is managed to suit the best interests of all stakeholders. The internal
stakeholders includes promoters, members, workmen and executive and external
stakeholders includes shareholders, customers, lenders, dealers, vendors, bankers,
community, government and regulators etc. It is interplay between companies,
shareholders, creditors, capital markets, financial sectors, institutions and law. Corporate
governance is concerned with the establishment of a system whereby the directors are
entrusted with responsibilities and duties in relation to the directions of corporate affairs.
Shareholders wealth is the cornerstone of good governance.

The concept of corporate governance depends on total transparency, integrity and

accountability of the management and the board of directors. The importance of
corporate governance lies in its contribution both to business prosperity and to
accountability. Corporate Governance is the mechanism by which the values, principles,
management policies and procedures of a corporation are inculcated and made manifest.
Corporate governance aims to minimize chances of corruption, malpractices, financial
frauds and misconduct of management.

Corporate Governance has to bring balance and equilibrium between various

stakeholders like owners, promoters, employees, shareholders, customers, creditors,
bankers, investors, government and society. Actually, this is a greatest challenge for the
entrepreneurs to balance interests of various stakeholders in the most optimum manner.
For example, in order to maximize the profitability, charging of prices for his products on
the higher side may result in losing customers. However, taking into consideration the
quality of products and demand for the products, if the customers have to bear higher
prices, the shareholders can be pleased with higher dividend.

Good corporate governance in the changing business dynamics has emerged as a

powerful propellant of competitiveness and sustainability. Proper dialogue with all
stakeholders is the key ingredients to delivering the desired value to the concerned
stakeholder. The corporate governance framework should recognize the legal, moral and
equitable rights of all stakeholders and encourage active co-operation not only with them
but also amongst themselves for the purpose of creation of wealth and its optimum
distribution.

Corporate Governance is indeed a way of thinking, an attitude and encompasses

the philosophies and processes in an organization that enable its people to weigh
competing objectives, challenges and opportunities and consistently find the appropriate
balance for rest of the world. Corporate governance principles and practices must be
followed in true spirit.

With the legacy of the English legal system, India has one of the best corporate
governance laws but poor implementation together with socialistic policies of the pre-
reform era has effected corporate governance. Concentrated ownership of shares,
pyramiding and tunneling of funds among group companies mark the Indian corporate
landscape. Boards of directors have frequently been silent spectators with the DFI
nominee directors unable or unwilling to carry out their monitoring functions. Since
liberalization, however, serious efforts have been directed at overhauling the system with
the SEBI instituting the clause 49 of Listing Agreements dealing with corporate
governance. Corporate Governance of Indian banks is also undergoing a process of
change with a move towards more market-based governance.

The country‟s economy depends on the drive and efficiency of its companies.
Thus, the effectiveness with which the Boards discharge their responsibilities determines
Britain‟s competitive position. They must be free to drive their companies forward but
exercise that freedom within a framework of effective accountability. This is the essence
of any system of good corporate governance. Corporate Governance is the system by
which companies are directed and controlled. Boards of Directors are responsible for the
governance of their companies. The shareholders role in governance is to appoint the
directors and the auditors and to satisfy themselves that an appropriate governance
structure is in place. The responsibilities of the board includes setting the company‟s
aims, providing the leadership, supervising the management of the business and reporting
to shareholders. The board‟s action is subject to laws, regulations and the shareholders in
general meetings. The management becomes self perpetuating and the composition of the
Board itself is largely influenced by the likes and dislikes of the CEO. Many companies
have set up a Nominations Committee of the board to recruit independent and talented
members. There is now increased recognition of the role that the Board could play in
providing a strategic vision to the company. The Compensation Committee of the Board
has been strengthened to exercise greater control over CEO compensation following
widespread complaints that top management pay is disproportionate to performance.
Most powerful and well established of the Board Committees is the Audit Committee.
Apart from acting as a deterrent against financial improprieties and frauds, the Audit
Committee also enables the Board to keep a pulse on the financial health of the company.
As far as audit is concerned, again the dominant role is that of the Comptroller and
Auditor General (CAG). The whole concept and system of corporate governance depends
upon the ethics, values and morals of a company as well as directors.
 Corporate Governance is such a burning issue for regulators that it is often
forgotten that the capital market by itself exercises considerable discipline over the
dominant shareholder. Unlike the regulator, the market is not bound by broad rules and
can exercise business judgment. It therefore makes sense for the regulator to pass on as
much of the burden of ensuring corporate governance to the markets as possible. In
addition, while regulators are keen that the corporates comply with all regulatory
requirements in operations, safety, pricing, pollution control etc., government would be
anxious that all due taxes are paid and there is support to its various schemes on health,
ecology and good citizenship.

It is the need of the hour and requires the whole-hearted commitment of all
individuals working in the company for the maximization of the stakeholders value and
not only shareholders value.

Governance is becoming more complex because the policy is fragmented. For

every reformer, you will find an anti-reformer. For every measure, you will find some
opposition. The task is ardous enough to put together a Govt. which commands majority
because the people seem to elect, for a wide variety of reasons, parties and individuals
who do not share a basic ideology or basic philosophy. A framework for addressing
concerns of public good, such as regard for environment, overall conservation of
resources, cost effective managerial input – all these would, among other things, form
part of the core of corporate governance. Government can play a catalytic role in creating
the environment for quality governance through an appropriate regulatory framework.

With emergence of global competition, corporate India in general has realized that
in order to grow, prosper and compete in International markets, they have to consolidate
their strengths and run them most effectively in an efficient and transparent manner by
adopting the best practices. The corporate India must commit itself to foster a culture of
prompt and innovative service provider with customer focus and become a reliable
business partner to derive consistent all-round growth in all facets of its operations.
 Corporate Governance is taught even at graduate level to management students. It
analysis the understanding level of corporate governance, their overall perception about
corporate governance and the role played by business schools in promoting good
corporate culture. The issues studied were classified into five dimensions, taken from the
literature about corporate governance namely (I) management issues (II) shareholder
issues (III) customer issues (IV) social issues and (V) personal issues.

With the increasing globalization of the Indian economy, the driving forces for
business ethics are getting strengthening. Firms engaged in exports, overseas
manufacture, distribution and service agencies have to match the best global
competitive standards of ethics. It is but natural that incoming Multi National
Companies prefer Indian partners with a more ethical reputation. Ethics carry
importance from the point of view of customers, shareholders, lenders, dealers and
vendors all of whom form part of the corps of external business stakeholders. Ethics
towards customers demand truth in advertising and promotion, delivering on promises,
giving value for money, redressal of complaints and meeting appropriate expectations of
quality, price, delivery, warranties and guarantee etc., ahead of the consumer protection
law.

Shareholders expect the management to be transparent in all financial

transactions, their accounting, audit and disclosure. They expect to be rewarded with
dividends, rights and bonuses, on par with promoters, in line with the profit and funds
flow. Lenders are keen that their funds are deployed in legitimate activities, promising
ventures and the obligations are met without pleading for deferrals, reductions or write-
offs.

In Singapore, corporate governance was sought to be ensured by the Registry

with the help of broad corporate objectives, inter alia providing fast and efficient
service in the registration of companies and the various returns and documents filed
by them, serving the public by providing efficient and speedy information pertaining to
companies and business while taking appropriate action against business operators who
failed to comply with the requirements.

The functioning of Public Enterprises boards has been subjected to criticism on

various grounds. The various practices followed, it is complained, do not facilitate the
emergence of an autonomous enterprises management and initiative and operating
effectiveness and yet be responsible and responsive to the government guidelines and
policies. The enterprises are also facing problems as the government is not strictly
adhering to the policy that all heads of public enterprises will have a five-year tenure.
This was accepted to improve the efficiency of top management. With regard to the role
of the chief executives, one of the problems is in that they tend of involve themselves in
day-to-day affairs leaving matters of policy to take their own course. The chief
executives should therefore be constantly concerned with long-term objectives of their
enterprises and also be capable of having an effective rapport with the secretary,
ministry and minister.

Good governance is not simply ensuring that one has decision-makers that
understand and can follow guidelines but also the development of institutions that punish
those who do not. The costlier it is to develop these institutions, the easier it will be for
corruption to flourish. Good corporate governance is a measure of true corporate success.
It encompasses the aspiration of all stakeholders including the community at large,
guiding the organization towards a higher degree of corporate excellence.

Corruption is made possible by the monopoly power that the existence of

government officials. The economic activities in countries like India need authorization
or approval of some government official. Sometimes, several officials with different
jurisdictions must authorize an activity. In countries where governmental intervention in
the economy is carried out mainly through broad, general and indirect policy tools such
as monetary policy, fiscal policy and exchange rate policy there is much less scope for
corruption. The fight against corruption should therefore start with the pruning of the
regulatory framework both at the national and local level.
 In India, Corporate governance standards for listed companies are regulated by
the Securities and Exchange Board of India (SEBI) through clause 49 of the listing
agreement of stock exchanges. SEBI issued circulars from time to time since 21st
February, 2000 to ensure compliance of various requirements in terms of corporate
governance. Companies which come under the purview of clause 49 of the listing
agreement are attempting to comply with the conditions strictly as per the provisions of
the said clause. Companies which are publishing corporate governance reports in their
annual reports have been broadly following the format as per clause 49. A very few
companies go beyond requirements of clause 49 in order to follow the principles on
which corporate governance is based namely accountability, transparency, fairness,
equity, efficiency, flexibility and above all legality and integrity.

Since corporate governance principles and practices have acceptance

internationally, listed progressive companies in India have not only followed the required
pattern as per clause 49 but have now made their Annual Reports fairly comprehensive to
make it attractive enough for various stakeholders like shareholders, customers, bankers,
prospective investors, business partners, creditors etc.

There are Companies like Infosys Technologies Ltd, Reliance Industries Ltd,
Siemens Ltd, Hindustan Lever, Bharat Forge, Tata Motors Ltd, Wipro, Global Tele,
NIIT, Satyam and Hindustan Lever Ltd etc. are showing high ambitions to ride the
wave of corporate governance. They all have system of very good corporate governance.
Bombay Suburban Electric Supply was awarded the Golden Peapock Excellence
Award in corporate governance for business excellence for their transparency in
corporate governance and the financial disclosures reflected in Annual Reports. Infosys
is giving plenty of information in its Annual Report like the following:
1. Shareholders Information
2. Frequently asked questions
3. Ratio Analysis
4. Statutory obligations
5. Human resource accounting and value-added statement
6. Balance sheet including intangible assets
7. Intangible assets score sheet
8. Value Reporting

Implementation of corporate governance in India has depended upon laying down

explicit codes which enterprise and the organizations are supposed to observe. India has
Kumar Mangalam Birla code as a result the committee headed by him at the behest of the
SEBI. The CII codes of corporate governance also provide fundamental guidelines. The
Indian corporate governance scenario is still found to be deficient for various reasons,
some of which are: (a) SEBI do not have all-pervading powers to police all violations of
regulations (b) Takeovers continued to be difficult given the paucity of timely
information and high transactions costs in the equity markets (c) Competition among
financial intermediaries and any of them state-run is limited (d) Disclosure norms under
the Companies Act are not very stringent. The need for corporate governance has been
highlighted because of the scams which are happening at regular intervals. India had the
Harshad Mehta, Ketan Parikh, UTI and the most recent Satyam Scam. Creating
proper public governance and making changes in the various regulations impinging on
the working of an enterprise or a body like the capital market, is the need of the hour to
establish better corporate governance in the country.

Judicial delays in this area are well known. The Naresh Chandra Committee
was not surprised to know that prosecutions are pending in courts for years together, it is,
astonishing nevertheless, that DCA have perhaps been unable to secure a jail term in even
a single case in the last five decades. The Committee noted that prosecutions once filed
are followed up by an officer designated for the task. Often, this post remains vacant,
with the result that this important aspect is looked after by another officer in addition to
his regular work. The committee would like to make two recommendations in this regard.
First, the prosecution wing in the DCA needs to be strengthened by increasing the
strength of personnel in the wing and supplementing it by hiring better advocates,
perhaps on a retainer basis, instead of relying only on the over-worked government
advocates. Secondly, the Department should examine the possibility of introducing
shortened procedures along with the lines of the recent amendment to the Code of Civil
Procedure e.g. recording evidence through commissioners.

The OECD Code also recognizes that different legal systems, institutional
frameworks and traditions across countries have led to the development of a range of
different approaches to corporate governance. Common to all good corporate governance
regimes, however, is a high degree of priority placed on the interests of shareholders who
place their trust in corporations to use their investment funds wisely and effectively.

The Comptroller and Auditor General (CAG) , Shri Vinod Rai said the
“Credibility of Government is at its lowest since Indepedence, the quality of governance
is below par and subject to severe criticism and decision making is a casualty.
Government is at its lowest ebb. The morale of civil servants is low. The situation is
deleterious for the nation. There is too much at stake for too many in such a situation.
Today, we are facing a testing time in the history of our nation. There has been an erosion
of people‟s faith in government. Their confidence in public institution has declined.
National trust in bureaucracy including the police force has collapsed. The integrity and
professionalism of civil servants is being questioned.” Rai said,” We have Chief
Ministers who have had to vacate their positions allegedly for graft on whom courts and
other judicial bodies have made adverse pronouncements. We have members of
Parliament who are being indicted by the judiciary for various acts including accepting
cash for exercising their vote in Parliament.” He again said,” It often provides very poor
testimony of our capabilities if members of the All India Services allow themselves to be
used if not as facilitators, certainly as a medium for wrongdoing by others. All attempts
to improve governance will come to naught if the agencies responsible for governance do
not consider probity in public life and ethical behavior as cardinal principles in their
1
official dealings.”

1
12th October, 2011, The Times of India
 The bench marking of best business practices including corporate governance in
the corporations all over the world is the order of the day to stay competitive and ensure
its continual growth. Corporations have to find out newer strategies in order to retain its
market share by winning over not only the mind but also the heart of its publics by
following the best and the most ethical practices to constantly improve the quality of its
corporate governance. The number of studies world over has repeated proved strong co-
relation in the financial performance of the corporations and its good corporate
governance practices. Most of the large corporations all over the world are encashing
their old goodwill based on its initial ethical conduct and different publics are so
impressed with its conduct that they are not even willing to hear and believe their
unethical, restrictive and monopolistic conduct to perpetuate their existing market image
and market share.

At this time, respective governments of different countries are under tremendous

pressure to adopt the best corporate governance practices of institutions like World bank
to adopt it in their respective countries through appropriate legislative measures because
for most of the large international contracts and business opportunities, compliance of
these practices is a pre-condition. In absence of these practices, such governments are
loosing out on precious and rare business opportunities which is so vital and important
for their own economy and growth and development. World trade Organization may
formulate its own set of Best Corporate Governance Practices and make it binding and
compulsory for all member countries to comply with the same in all bilateral and
multilateral business transactions.

Chief Justice of India S.H. Kapadia, Justice K.S.Radhakrishnan and Justice

Swatanter Kumar held “Corporate Governance has been a subject of considerable
interest in the corporate world. The Ministry of Corporate Affairs has issued several press
notes to the Government of India for information of such global companies which will
indicate that Indian corporate law has also accepted the corporate structure consisting of
holding companies and several subsidiary companies. A holding company which owns
enough voting stock in a subsidiary can control management and operation by
influencing or electing its board of directors. The holding company can also maintain
group accounts which is to give members of the holding company a picture of the
financial position of the holding company and its subsidiaries. The form and content of
the holding company or subsidiary company‟s own Balance Sheet and Profit & Loss A/c
are the same as if they were independent companies except that a holding company‟s
accounts an aggregated value of shares it holds in its subsidiaries and in related
companies and aggregated amount of loss made by it to its subsidiaries and to related
companies and their other indebtedness to it must be shown separately from other assets,
2
etc. “

SUGGESTIONS
Thus, the corporate governance to succeed, some convergence on a few economic
issues is vital. According to Raja J. Chelliah, the official economic doctrine in India has
not been modified to take account of the serious problems of governance that have arisen
over the years in our country. It is felt that the deplorable weaknesses in the system of
governance in our country can only be remedied through a movement of moral
regeneration backed by sufficient pressure by an enlightened public. Institutional and
structural changes are required in addition to moral exhortation.

Some priority areas have been suggested by Dr Chelliah for policy action in
Fiscal Policy & Governance, National Institute of Public Finance and Policy, New Delhi:
In the area of government action, i.e., the scope of governmental activities should be
narrowed down substantially , e.g. withdrawal from the business of production of
private goods which are of no significance either from the social or strategic point of
view; public enterprises operating in competition with private enterprises and being
made fully autonomous; further liberalization and reduction in the number of controls;
governmental procedures for various types of approvals being simplified with strict
time limits; avoidance of duplication of functioning by the Center and the state

2
Vodafone International Holdings B.V. v. UOI & Another (2012) 170 Comp Cas. 369
(SC)
governments and procedural changes; introduction of a system of reward and
punishment which is correlated to quality and performance and rationalization of the tax
system.

The quality of Corporate Governance has to improve substantially in order to

protect the interest of the all stakeholders and the citizens in the interest of long-term
growth and development of the corporations. Due to fast changes in technology
especially in the area of information technology growing globalization, privatization and
liberalization and due to initiative of institutions like World Trade Organization, World
Bank and International Monetary Organization, not only the way corporations functioned
so far is changing but also they are increasingly becoming more focused in their vision,
mission, philosophy and objectives.

It is believed that Corporate Governance involves essentially a creative,

generative and positive thinking and activity that add value to the various stakeholders
that are served as end-customers. It impels the professionals responsible for good
corporate governance to install processes, inspire and empower to create value and to
enhance value. Be it finance, legal framework, human relations, taxation, marketing,
marketing research, product research, product selling, treasury function, organic and
inorganic growth, development thinking and activity, good governance demands
dynamics and creative ethos.

I am of the opinion, that the company‟s system should be under constant scrutiny
for their enhancement towards greater control, reliability and integration, better product
and service quality, cost efficiencies and information transparency which will lead to
higher operational efficiency and optimize shareholder value in the long-term.

It may be mentioned that corporate governance should help transforming ideas

into viable and creative solutions, vibrant working environment, and fulfillment of
aspirations of not only the employees but also other stakeholders particularly providing
consistently high return to shareholders.
 As Corporate Governance should ensure courtesy, dignity and respect in all types
of transactions and functions of a company, „Honesty is the best policy‟ is very much true
in corporate governance.

It is true that Corporate Governance is a continuous unending journey. In fact it is

a way of life and not set of rules. Since it is associated with all stakeholders and not only
shareholders, it should be all about a genuine concern and care for the over all well being
and welfare of all constituents of the systems.

Values of Performance Excellence, Nurturance, Customer Orientation and

Intellectual Honesty constitute the platform for promoting a harmonious environment for
the growth and responsiveness to the interests of its various stakeholders.

In my view, if a company manual be prepared including rules and regulations

followed in a company, technical features of the companies product, board structure,
management structure may be included in such manual so that orientation programs can
be easily carried out.

Every corporate should be aware and investigate any warning sign. Create or
preserve a record supporting the investigation and generally helpful for the cause e.g.
minutes of meetings, important documents and provide for indemnification for every
individual director/ officer who is actively involved in the decision making process.
Increase the frequency of the meetings of audit committee, remuneration committee and
nomination committee.

It is imperative that each and every individual in an organization should be an

integral part of the corporate governance framework. Unless there is wholehearted
commitment on the part of all the people in the organization corporate governance in the
true sense of the term will not prevail.
 It is necessary that companies do not judged merely on the form part of corporate
governance but also on the substance part of corporate governance. The corporates are
required to be assessed on the basis of their ability of wealth creation, wealth
management and wealth sharing.

A very few companies have a chapter in the annual reports which covers
corporate social responsibility. In the case of Deepak Fertilizers and Petrochemicals
Corporation Limited, annual report includes social report to demonstrate that the
company remains deeply committed to its social responsibility and the cause of social
development and upliftment. The company has bagged the second runner-up award for
the corporate social responsibility by the business world – FICCI Social and Economic
Development foundation for the year 2005. As per the Companies Bill, 2011 ( likely to
be passed ), it will make mandatory for companies to earmark 2 percent of their average
profit of the preceding three years for CSR activities and make a disclosure to
shareholders about the policy adopted in the process. It is recommended that the
corporates should take care of this concept.

Only some companies have shown awareness of environment protection. May be

that the concerned companies are conscious only of their own problems and have ignored
environment related problems which are so vital from the point of view of the society.
Hence, I am of the opinion that every company should concentrate on this human
consideration.

One of the disclosures which shareholders seek at the annual general meetings is
declaration of dividend policy and announcement of bonus shares when the company‟s
free reserves are high compared to paid up capital. Although announcement of bonus
shares is a privilege of the board of directors, only a few of the companies are stating
their dividend policy in the directors report. This sort of disclosure will reflect the good
image of the corporate. This point should be kept in the mind of management.
 Under the present scenario, reference to stakeholders is mainly to shareholder
since he has a right to attend and vote at general meetings and make observations and
comments on the performance of the company reflected in the balance sheet and profit &
loss account which is required to be adopted at such meetings. The other stakeholder like
depositors, creditors, bankers, employees etc. are not entitled to attend such general
meetings and cannot make open comments and observations in the presence of all the
directors which are present at the meeting. Hence, they have an indirect role in judging
the efficacy of corporate governance. This system also requires improvement.

Having regard to what is stated above, it is in my opinion that the company‟s

systems should be under constant scrutiny for their enhancement towards greater control,
reliability and integration, better product and service quality, cost efficiencies and
information transparency which will lead to higher operational efficiencies and optimize
shareholder value in the long-term.

It is also observed that mere checklist of SEBI guidelines and box-ticking

guidelines exercise will not be sufficient. The corporates must learn to look at the core
and qualitative issues of corporate governance much beyond SEBI code.

It is felt that quality of corporate governance will depend on the quality of

leadership. Corporate governance code would provide for a certain proportion of
independent and other directors on the board. The board and the senior operating
management should provide dynamic leadership to make corporate governance effective
and efficient. Directors of the companies should be given training conducted by
professional well recognized management institute and by eminent faculty members and
should cover areas, among other things, leadership, Strategic business planning, financial
and trade risks, legal and regulatory compliance and key corporate governance issues
such as code of conduct business ethics and values, accountability disclosures and social
responsibilities. The board of directors and management has to face the challenge of
maintaining balance and equilibrium between all stakeholders to meet the goal of „justice
to all stakeholders‟.
 Prominent Rating agencies ICRA, CARE and CRISIL are assigned to see the
compliance with the corporate governance standards and Norms. These rating agencies
should also have a futuristic approach that can be easily established through the system of
trend analysis. By promoting the use of employees assessment of managerial practices,
corporate governance rating practices will further improve the corporate integrity.

Corporate governance is ongoing activity and in a going concern. By evaluation

or rating on continual basis will keep constant check on the activities of the board and the
keep the stake holder‟s updated on their activities as the rating agencies will be required
to disclose the rationale that they have followed in arriving at the rating. The human
dynamic aspects of corporate governance like honesty, leadership, character etc. cannot
be rated and this is to be installed from within by our corporate leaders.

In the judiciary, the backlog of cases is so monumental that the Indian case has
become a perennial citation for the rest of the world. Here independent tax courts
commercial courts and the like must be considered. Only that will put in place a dynamic
judiciary and firm up some of the path breaking measures that it has recently taken to
challenge the lack of action in the other branches. In the executive branch, civil servants
are rarely complemented by professionals with specialized training and instead are
moved from one specialized department to another. There is little effective interaction or
involvement with researchers. Fundamental reform is necessary therefore to allow the
infusion of specialized knowledge from different professions into the executive branch.

In a society which is acquiring the shape of global village through constant

dissemination of information with the help of media, information sharing through
workshop, seminars, research and development, internet etc. controlling through
concealing information about its performance would be virtually impossible for
corporations. Hence, it is in the own interest of the corporate sector to follow the
principle of good governance and implement it through the collective participation of all
stakeholders including shareholders, debenture holders and depositors, employees, full
time directors, managers, supervisors, workers and consultants, suppliers, distributors,
different government agencies, print and electronic media, financial institutions, bankers,
community in which it is located and the different influence groups exercising economic
or social control on its functioning and last but not the least its customers and consumers.

The bench marking of best business practices including corporate governance in

the corporations all over the world is the order of the day to stay competitive and ensure
its continuous growth. Corporations have to find out newer strategies in order to retain its
market share by winning the mind by following the best and the most ethical practices to
constantly improve the quality of its corporate governance. The number of studies world
over has repeated proved strong co-relation in the financial performance of the
corporations and its good corporate practices.

As a matter of fact, respective Governments of different countries are under

tremendous pressure to adopt the best corporate governance practices it in their respective
countries through appropriate legislature measures of these practices is a pre-condition. In
absence of these practices, such Governments are loosing out a precious and rare business
opportunities, which is so vital and important for their own economy and growth &
development.

To focus on good governance, It‟s time to end the boycott of Parliament by the
opposition because of the pressing economic problems confronting the nation. Continued
disruptions will mar the investment climate and the country‟s economic health. A host of
important policy decisions remains on the table. The goods and services tax, which will
create a unified market in the country, awaits rollout. Rising food prices demand a closer
look at agricultural reforms to mitigate supply-side deficiencies. The Judicial Standards
and Accountability bill, the Public Interest Disclosure Bill for the protection of whistle-
blowers and the Lokpal Bill are important legislations hanging fire in Parliament. They
need to be pushed through quickly to combat institutional corruption and ensure probity
in governance. 3

Good corporate governance is a measure of true corporate success. It

encompasses the aspiration of all stakeholders including the community at large, guiding
the organization towards
a higher degree of corporate excellence. This in turn yields long-term value additions for
the stakeholders.

Good corporate governance entails making a corporate, a responsible corporate

citizen that will not only protect the shareholders wealth but will also contribute towards
social good. Looking within the organization, the leader must be just as sensitized to his
responsibilities towards employees and to the welfare of the extended family of the
organization i.e. families of employees.

I may refer to another point that Corporate Governance is not merely compliance
and a simply a matter of creating checks and balances – it is an ongoing measure of
superior delivery of company‟s objectives with a view to translate opportunities into
reality.

It is understood that Corporate Governance is the means and not an end. They
should get reflected in the performance of the company in terms of profits, profitability,
growth, diversification, welfare, cordial industrial and other relationship at all levels.
Corporate governance is the means and corporate excellence is the end.

Corporate governance has to travel much beyond statutory bounds. I may mention
that the Board and Management is responsible in this respect and in the event they follow
ethical and moral and of course practical methods, corporate governance will lead to
emergence of responsible corporate citizens.

3
Article in The Times of India, New Delhi dated February 18, 2011
 Notwithstanding the convergence towards prescriptive, self-regulatory
governance principles, there is relatively little discussion on measures to improve
corporate performance. The primary objective of sound corporate governance must
contribute to improve corporate performance, the integrity of financial markets and
ultimately to the international competitiveness of the economy. Good corporate
governance is a necessity but may not be said to be sufficient condition for achieving
performance of global standards. The economic settings along with cultural and
behavioral attitude of shareowners, directors, management, workforce and institutional
arrangements are equally important.

If the Corporate Governance is pillared on the values of true understanding,

concerted efforts and true commitment in every endeavor, small or big, it will lead to
global foothold getting stronger with every passing moment. Only well-nourished
systems and practices of corporate governance will transform the industrial society to
take India to the top position in the developed nations by 2020, if not earlier.

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