We all witnessed recent Satyam episode, a never before fraud of it's kind in corporate world of India. Mr Raju showed everyone that greed for position or money can result in loss of millions for investors of any company. I see this unfortunate incident as an isolated one and not actually representing the whole corporate world. However, it is high time that companies in India and abroad realize their Corporate social responsibility.
I recently read a very nice article in National Stock Exchange of India newsletter, about implications of new SEBI Rule on promoter share pledging disclosure. The article is written by by Shankar AVSB, CEO of 7Avenues and Prakash Kumar, non-executive advisor for 7Avenues. The article explains the benefits of recent changes in regulations by SEBI and the interpretation of those for investors. New regulations by SEBI have started showing their effect in stock market, as many blue-chip stocks are seeing downward trend ever since their promoters disclosed their share pledge details.
There are not many companies that have been able to set example for Corporate Social responsibility. Infosys has stood by it's commitment to fair auditing process. It was great to hear from Infosys leadership that at Infosys, the bank statements go directly to the auditors of the company, which makes sure that the cash available with the company is the actual cash, rather than the inflated one as in case of Satyam.While India needs leaders to become a superpower, we also need to make sure that ethics, strict auditing regulations and accountability of company's board members are given high importance. These are critical for protecting the future of the investors, employees and their families. We do not want people like Mr Raju who served as role model for almost everyone in Andhra Pradesh for many years and finally turned out to be a fraudster. In my view, true leader is the one who leads by example, along with ethical values in place.
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10 comments:
This issue is not related to Corporate social responsibility, but
Corporate Governance.
I have experience of Corporate working,and also of capital markets,for 22 years n have also served in many associations , like CII, IMA, SOPA, FICCI etc, n I can say it with almost certainty that the track record of Indian corporates in Corporate governance is very poor, what we see is just the lip service. we need to do a lot ,if we need maturity of economy.
Raj,
A very apt discussion at a very right time.
Rakesh, traditionally speaking, you are correct, but I suspect Raj has done it intentionally. After Satyamgate and the recent trends as brought out by Raj, Corporate governance is no longer a choice. It has to become a Corporate Social Responsibility.
What better way than to start a movement to force these blue chip companies go 'ethical'. It would be great id people could start off with whichever issue they believe in.
Masses can also become Change Managers, if they get together!
Thanks for comments from both of you.
I agree that the track of Indian Corporate governance is poor and there is lot to do, in order to make things better. Yes, Corporate Governance is no longer a choice and we need to make corporate social responsibility the way of life.
We all can see that current times present good opportunity for India to emerge as a leader in the world and therefore, this is right time to make conscious efforts towards value system in the corporate world.
Dear Raj,
I disagree with you about Satyam being an isolated case. The greed to make millions has infested a major part of the Corporate World in India. Publicly Satyam has excellent CSR initiatives and yet the Company was making a mockery of Corporate Governance. There is a lack of transparency all round. The media, supposedly the watchdog of society is incapable of exposing the skeletons in Corporate cupboards. CSR reporting in India has turned into a public relations exercise.
Suresh Kr Pramar
The new world being born has at it heart corporate responsibility which includes ethics, governance, social, environmental, economic, spiritual, global, etc etc actions. I call it "doing good is great for business." Only people who don't believe in doing good are fighting this nowadays. The evidence that "doing good is great for business" is overwhelming. Business folk serious about this have corporate responsibility has a part of their core strategy and measure it. Those who have corporate responsibility as part of their strategy yet don't measure it are not serious.
Thanks for your comments.
Yes, we need leaders who are responsible and take care of interests of stake holders & employees. A strong value system needs to become a corporate practice now and should be measured effectively.
I would agree with Rakesh, that discussing it in the context of Satyam (perhaps that wasn't Raj's intention) the issue belongs under Governance - however, CSR is the larger umbrella under which arguably, CG has a place.
Corporate governance has to be looked at from a holistic standpoint: best practice, behaviours, checks & balances, and consequential liabilities. Unless each of these is addressed simultaneously, corporate governance becomes wobbly quite quickly.
Note, mitigating the risk of fraud is only one aspect of corporate governance - its more constructive (and positive) purpose is to create and preserve shareholder (even stakeholder) value.
I would venture so far as to say that except for MNCs, whose corporate governance guidelines are enshrined in the Directors' Handbook and annually administered (with some notable exceptions) by one or the other international tax/audit/advisory firm, Indian companies by and large still need to be made aware of and adopt international best practice. Though this is probably the easier issue to solve.
A bigger challenge is that of institutionalising good corporate governance in executive boardrooms. This is tricky in India, partly because of a long tradition of family owned businesses, where being answerable to anyone except the patriarch of the family would border on sacrilege, and partly because of the "slow" legal system where there is no immediacy of consequences to irresponsible decision-making. Behaviours would need to change.
Where the regulatory body of the country is itself passive, at least in so far as it could have done much more in creating a forum for presenting and instilling desired or expected behaviours amongst the business leaders, in a lassiez-faire environment where consequential liability is not hanging over the executives' heads, self-administered checks & balances can only work, if there is a designated role with direct accountability for ensuring compliance. At least amongst those responsible Board Members, there would be a need to get them out of their lame duck roles.
Not surprisingly, the above is very relevant to the day-to-day of conducting business across the globe, where Indian suppliers are delivering products and services to foreign clients. Insufficient oversight, on top of a haphazard or overly bureaucratic regulatory regime is not a likely remedy. Of course, in the specific case of the evolving Satyam story, if SEBI were to be seen giving a lackadaisical performance in its forensic analysis, or of laxity in regulatory tightening moving forward, it could potentially hurt the Indian businesses quite severely. The world is watching on this one.
Thanks for your comments.
Yes, In my view, the umbrella of CSR covers Corporate Governance. The board members of the companies need to understand their duties and be held accountable for the decisions.
Each one of us need to put effort to improve the system and processes.
Dear sir,
I believe, CSR is a term coined by some shrewd executives to fool the world. What should be responsibility of an organizations? I think, fulfilling value proposition promised by them to their stakeholders. If Pepsi/Coke/HUL/ITC etc. are really take care of their stakeholders, there is no need to CSR. If ITC selling cigarettes on one hand and running some rural projects for society development on other hand, it does not make sense. If Pepsi selling adulterated cold drink and also running water recycling project, what is the use?
CSR would be something company would use for their benefit only by camouflaging their wrongdoings.
Thanks for sharing your interesting thoughts, Amit.
In my view, an organization should be ethical in their products/services as well as to their shareholders and to the society.
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