VALUE ADDITION TO ENTERPISE THROUGH CORPORATE GOVERNANCE Pavan Kumar Vijay Managing Director 07/03/22
Jun 11, 2015
VALUE ADDITION TO ENTERPISE THROUGHCORPORATE GOVERNANCE
Pavan Kumar VijayManaging Director
04/13/23
What is Corporate Governance???
Corporate Governance rests with the Vision and Perception of the Leadership
and
A Leader need to adopt a
Vision for Corporate Governance
Corporate 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
Principles 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
Fairness to all stakeholders
Mutual Trust, Transparency and Togetherness
Unrestricted Communication and Continuous Feedback
Sharing Knowledge, Success Stories and Experience
Infact, these principles are the foundation of
Best Governed Organizations'
irrespective of their form and size
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
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
Companies that have followed these
principles of
Corporate Governance
have
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
“ Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.”
- The Institute of Companies Secretaries of India-
Value Addition to Enterprise through Corporate Governance
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
Corporate Value without Corporate Governance – The Past
COMPANY
• Loss of reputation in International Market
• Loss of Moral Fibre of Corporataions.
Corporate Value without Corporate Governance – The Past
STAKEHOLDERS
• Auditors - Independence compromised to
obtain lucrative consulting assignments
• Employees - Large disparity between the
highest and lowest paid employee
• Analysts - Ever-greening of Corporate &
Stock reports.
Corporate Value without Corporate Governance – The Past
STOCKHOLDERS:
• Loss of Investors Confidence.
• Difficulty in further raising of capital.
• Investor Complaints
Corporate Value without Corporate Governance – The Past
PRACTICES:
• Aggressive accounting practices.
• Incompetence of board members and
overriding of audit committees .
• Dividend linked to short-term revenue
growth, EPS and stock price.
Upshots in Legal Framework
Clause 49 of Listing Agreement.
Section 192A, 292A etc. in the Companies
Act
Legal Norms of CG
Concept of Independent Directors & Audit Committees
Stricter independence standards for Audit Committees
Board Professionalism
Whistle Blower Policy
Certifications and disclosures
Real time disclosure & Shortened deadlines
ARE SHAREHOLDERS THE ONLY STAKEHOLDERS ?
Corporate Governance Value Chain
“Corporate Governance is not related to investors only, though they are most
important Beneficiary.”
Stakeholders 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
Stakeholders’ Stake in Corporate Governance Value Chain
2 : 1 Debt –
Equity Ratio
2 : 1 Current Ratio
What CG Brings…
Value Addition through CG
CORPORATE GOVERNANCE
INVESTORS LENDERS CUSTOMER EMPLOYEESUPPLIER
•Confidence•Security of Funds
•Safety of interest & principal.•Better & Favorable Credit Terms
•Value Creation•Better quality of Products/ Services•Cheaper prices
•Value Creation•Favorable terms of supplier agreements
•Better quality of HR•Better Salary•Benefits•Stability
Govt./Regulator
•Tax•Compliance•Employment•Social Commitment
Measurement of Value Addition
Benefits As To Corporate Governance
Investors
Lenders
Customers
Suppliers
Employees
Government
Regulators
• Increase in Goodwill• Increase in Investment
• Better credit terms• Fund security
• Better quality goods• increase in Goodwill
• More credit• Increase in creditworthiness•Reduction in Employee Turnover
• Relaxation of norms
•Increase in Goodwill•Relaxation of Norms
Corporate Governance Enhances Brand Value
Quality in Board Structure
Better Board Management and Practices
Contribution of Independent Directors
Successful Strategies
Adequacy of Controls
Independence of Auditors
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
..…Only the culture of strict adherence to good
compliance can keep a company
ahead on sustainable basis , bring in larger profits…
Secret behind building foundations
Present 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
Stakeholders Status
Share Holders High
Debt Holders Highest
Employees Moderate
Customers High
Suppliers Scope for improvement
Society Scope for improvement
Thus, Although a lot has been done, but a lot needs to be done.
CORPORATES SHOULD ACT LIKE HONEY BEE WHICH SUCK THE NECTAR OF THE FLOWER WITHOUT EFFECTING THE FRAGRANCE AND PRODUCE HONEY FOR THE WELL-BEING OF SOCIETY.
THANK YOU