Corporate Governance and Sustainable Development Pavan Kumar Vijay Past President, ICSI MD, Corporate Professionals Date: 23/02/2010 Delhi University
Corporate Governanceand Sustainable
Development
Corporate Governanceand Sustainable
Development
Pavan Kumar Vijay
Past President, ICSI
MD, Corporate Professionals
Date: 23/02/2010Delhi University
Corporate Governance rests with the Vision and Perception of the Leadership
and
A Leader need to adopt a Vision for Corporate Governance
Corporate Governance FrameworkCorporate Governance Framework
Output – Input = Wealth Created ?
Sustainability
Happiness andProsperity of all
Stakeholders
Reinvestment
Distribu- tion
Research and DevelopmentHR DevelopmentInfrastructureRisk Management
SUPPLIERS Adequate ReturnsHUMAN ASSETS Adequate RemunerationCUSTOMERS Affordable PricesPUBLIC Payment of Taxes and Partnership in National Development Projects
Wealth Creation Wealth Management Wealth Sharing
EnhancedCapabilities
Best Management Practices are Vital Here Law and Ethics are Vital Here
Stakeholders in Value ChainStakeholders in Value Chain
SUPPLIERS CUSTOMERSHUMAN RESOURCE
Supply Funds, Materials and Services
Value Addition and Management of Resources
Give Opportunity to Co. to Satisfy their Needs
Adequate Returns for Funds, Material and Services Supplied
Adequate Salary and Security for leading a Happy Life
Best Quality Products and Customer Care at Minimum Prices
ROLE OF STAKEHOLDERS
EXPECTATIONS OF STAKEHOLDERS
Potential Suppliers, Human Resources and Customers
Biological, Economic and Cultural EnvironmentPUBLIC
PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT
Principles of Corporate ExcellencePrinciples of Corporate Excellence
Fairness to all stakeholders
Mutual Trust, Transparency and Togetherness
Unrestricted Communication and Continuous Feedback
Sharing Knowledge, Success Stories and Experience
Sharing Happiness and Concerns
Helping Each Other – Round the Clock
Infact, these principles are the foundation of
Best Governed Organisations
irrespective of their form and size
Advantages of applying Best Corporate Governance Practices
Growth
Growing Revenues
Growing Profits
Growing Market Value
Widespread Goodwill and Brand Reputation
Access to Global Markets
Better Access to Human Capital
Ready Market for New Products
Widening Customer Base
Enhanced Trust and Confidence of all
Stakeholders
EMPLOYEESEMPLOYEES
INVESTORSINVESTORS CUSTOMERSCUSTOMERS
SUPPLIERSSUPPLIERS
GOVERNMENT AND REGULATORS
GOVERNMENT AND REGULATORS
SOCIETYSOCIETY
Leading to…
Environment
Civil SocietyBusiness Society
SUSTAINABLEDEVELOPMENT
Commitment to well-being and progress of all stakeholders is our age old mantra
Satyam Vada Dharmam Chara
- Taittariya Upanishad
“Forever speak the truth and follow the
dharma”
Truth : Disclosure of Actual State of Affairs
(Transparency in operations and transactions)
Dharma : “Dharma is for the stability of
society, the maintenance of social order and the general well-being and progress of humankind.”
- Karna Parva of the Mahabharata. Verse-58 in Chapter 69
Governance Concept in ‘Ramayana’Governance Concept in ‘Ramayana’
To provide “the maximum happiness for the
maximum number of people for the maximum
period, based on the principles of Dharma –
righteousness and moral values.”
- Ayodhya Kand
“The Customer is King”
- Mahatma Gandhi
This is the soul behind modern
Marketing Management
Worshipping 33 Crore Godheadssignifying various species, plants,
cosmic elements, …
Care for Panchtatvas - Prithvi, Jal, Vaayu, Akaash and Agni that make a human
being
This is our approach to
Environment Protection
The four essential principles of Mahatma Gandhi's philosophy
Truth, Ahimsa, Trusteeship and Constructive Action
Corporates are also expected to use their
Capacity, Knowledge and Resources
Maximisation of stakeholders’ value and well-being and progress of humankind
TOWARDS
THROUGH
Transparency, accountability and truthful disclosure of state of affairs
Dharma
Truth
This is our own age old mantra of
Good Governance
Outstanding Performance,
Higher Profits,
Expanded Market Reach and the like
FAILS
to protect a company
which has put good governance & ethics
at the back burner….
History is Witness
S
U
C
E
S
S
D
I
S
A
S
T
E
R
History has also repeated itselfHistory has also repeated itself
The SATYAM Fiasco
A mockery of Corporate Governance
The Satyam FiascoThe Satyam Fiasco
• Out casting of Minority Shareholders
• Diversion of property from Company where the
promoter has merely 8.5% stake to a company with
100% stake.
• Attempt to turn company sitting on cash into a debt-
ridden company.
• Fudging of accounts of thousands of Crores.
..…Only the culture of
strict adherence to good compliance
can keep a company
ahead on sustainable basis , bring in larger
profits…
Secret behind building foundationsSecret behind building foundations
CORPORATE GOVERNANCE
AT
Company Philosophy on Corporate Governance
Corporate Governance standards should go beyond the law.
Maintain high degree of disclosure levels. When in doubt, disclose.
Make a clear distinction between personal conveniences & corporate resources.
Management is the trustee of the shareholders’ capital and not the owner.
Board Meetings
2. Drafting of Agenda by Chairman of the Board & Company Secretary in consultation with Lead Independent Director
3. Circulation to all Directors
4. Recommendations for inclusion of items
5. Inclusion of items in the agenda
6. Meetings of Committees
7. Formal Board Meeting with video conferencing facilities to all directors
1. Scheduling of dates of Board Meetings
Committees Management
Audit Committee – 6 Members – All Independent Directors (Cl. 49 requires minimum 3 directors)
Compensation Committee – 4 Members – All Independent Directors (Non-mandatory under Cl 49)
Nomination Committee – 5 Members – All Independent Directors (Not required under Cl 49)
Investors’ Grievance Committee – 4 Members – All Independent Directors (Cl 49 requires only the Chairman to be independent) – 0 Pending Complaint
Investment Committee – 7 Members – All Executive Directors (Not required under CL 49)
Each committee has its detailed charter.
Compliance with Non-mandatory requirements
1. Maximum tenure of independent directors is nine years.
2. Dissemination of regular information to investors through e-
mail, telephone, face-to-face meetings, road shows etc.
3. Presentations are made by executive directors to familiarize
the new non-executive directors with the Company’s
operations.
4. Evaluation of non-executive directors through a peer-
evaluation process.
5. Whistle blower policy providing direct access of employees
to Chairperson of Audit Committee.
And
That’s what makes
Infosys
A value driven organization
CRISIL – CRISIL
GVC Level 1
ICRA – CGR 1
Present Status of CG Practices – The CRISIL ExperiencePresent Status of CG Practices – The CRISIL Experience
Practice Status
Equitable Treatment of
Shareholders
Moderate
Transparency and Disclosure
Relatively
strong
Composition of Board Scope for improvement
Functioning of Board Moderate
Value Addition - The CRISIL Experience Value Addition - The CRISIL Experience
Stakeholders Status
Share Holders High
Debt Holders Highest
Employees Moderate
Customers High
Suppliers Scope for improvement
Society Scope for improvement
Companies that have followed theseprinciples of
Corporate Governancehave
Consistently earned high returns, increased their net worth and
enhanced their shareholders wealth
Invested significantly in proactive research and development
Developed people into ‘achievers’ than just ‘performers’
Dealt ethically with customers, government and business partners
Maintained and updated their professional management culture, system and processes
..and accomplished
WINNINGEMPLOYEES
WINNINGEMPLOYEES
GROWINGINVESTORS
GROWINGINVESTORS
DELIGHTEDCUSTOMERS
DELIGHTEDCUSTOMERS
TRUSTEDSUPPLIERS
TRUSTEDSUPPLIERS
SATISFIEDGOVERNMENT AND
REGULATORS
SATISFIEDGOVERNMENT AND
REGULATORS
HAPPYSOCIETY
HAPPYSOCIETY