Immense confusion surrounds the word Corporate Governance.
Despite the hype of this word has achieved during the last
few months few people know the true of significance of Corporate
Governance. The word come to the fore each time we hear a
scam.
Many definitions have been given on Corporate
Governance. The one which I most like is that Corporate Governance
is traditionally defined as the systems of laws, regulations
and practices which will promote enterprise, ensure accountability
and accelerate performance. It aims to improve the effectiveness
of the decision making in company board’s. The effectiveness
has been interpreted to mean that business is run in a manner
that investors receive a fair return. Confusion about the
role of Corporate Governance has a arisen from the fact that
like Draupati Corporate Governance has five husbands: Shareholders,
Board of Directors, Management, Stakeholders and Regulators.
Corporate Governance system has to satisfy all those five
constituents. This is why Corporate Governance is so challenging.
The basic purpose of Corporate Governance is to keep a watch
on the role of insiders who control the resources owned by
investors. It is for this reason that the corporation started
professionating the management through independent CEO’s.
But over the years the CEOs developed so much power that they
became superstar. During 1990, which CEO salaries increased
by 800% the employees salaries not done by 1% in real ways.
If In the heyday of Corporate Governance in the earlier 90’s
especially in the US the CEO’s arrogated more and more responsibilities
in the _____ process and ____ was centered abound the difficulties
of the CEO’s. This is ____ built the Corporate Governance
heroes such as Percy Parnebik and the like Jack Waelch. We
are now seeing the backlash of such hero version. All poor
performance of the companies and dishonest presentation of
reports preserves by the market downward ___ by the heros.
Credentials UK’s chairman of insurance company has asked its
chairman Rozer Hurm to resign for his failure in disclosing
the true financial state of Marconi. Bernie Ebber who made
word com _____ built the empire has been _____ to with. Diana
Brucks of South B_____ has just escaped the jail from her
sentence. Jean marie Messier bon of Vivendi Universal the
great media emperor has been sacked. Neither Jack bell nor
Jack Immelt has the karishma they were attributed with.
Arthur Anderson is not the only company to
flounder because of what they have been alleged to have done
or not done at ENRON. Equitable is suing Ernst & Young,
its former auditors for upto $2.6 billion for its role in
guaranteed annuity crisis that brought the world’s oldest
life assurer to virtual collapse. These winds of change are
affecting all the companies. Soon after Marconi and Enron,
there are murmurs of lack of transparency at GE, the world’s
most admired company and Merrill Lynch the World’s most admired
financial institution. Why is it, we wonder, that today’s
business press is full of stories of greed and scandal. Has
our generation become more dishonest than the previous ones?
The answer is a resounding no. The difference is that in the
internet economy of today you cannot hide behind a smokescreen
of platitudinous phrases that the rich and powerful have successfully
used in the past. Today, if things go wrong you are certain
to be found out. That things will go wrong today is far more
probable than ever before because excellence today is achieved
not by perfection of the same but doing something different,
radically different. The skill is in being able to own your
failures, turning them to your advantage, going to the shareholders
and telling them how you have benefited from these failures.
Shareholders are becoming increasingly savvy and would appreciate
this as they realize that success in the knowledge economy
comes from good tries and acknowledging failures.
The companies that have collapsed whether
Enron or Marconi have not done so because of wrong business
decision but because the failures were not honestly shared
with the shareholders. The solution, therefore, of the problem
does not lie in Lorg Young’s recent call at the UK’s Institute
of Directors for abolishing the non-executive post of directors.
It lies in having more of them. The question is not whether
or not we should have independent directors. It is how we
can ensure they act independently. To answer it you must find
how directors are recruited? If independent directors are
simply and extension of the board’s network there would be
no independence. If independent directors are also given lucrative
consultancies assignments as was done by Enron, the purpose
is defeated. Time after time they surveys of directors have
shown that only a very small proportion of the independent
directors is thorough nomination committees nomination committees
where independent directors form the majority. But again the
appointment should not be by the members of the nomination
committee but though a search firm hired for the purpose.
Nomination Committees neither have the objectivity nor the
expertise for such appointments. A good search firm will ensure
that the non executive directors appointed match with the
company’s strategic direction, corporate culture and the skill
set required by it. Here again matching perhaps is a wrong
word. What we need is someone with a difference. In an economy
driven by innovation new ideas will come from the degree of
diversity of the Board. The complexity and the variety of
the today’s management challenges cannot be met by a single
skill set. It needs a multi pronged approach and calls for
multiple disciplines and experiences to be brought into the
board.
This brings us to the next question. What
are we doing to prepare the Non-Executives or independent
directors for their substantially changed role from pliant,
rubber stamping robots to providing strategic direction, spurring
innovation and encouraging creativity. Are they being trained
for this new role? Most directors believe they know all that
is to be known about directorship. This is he biggest folly.
The fact is in the economy of all change they have to relearn
like every one else. Regardless of the fulminations of Lord
Young, investors today expect the world from non-executives.
Quicker these directors come to terms with these expectations
better it will be for all concerned.
The immense confusion around the word Corporate
Governance how does it promote Enterprise? How does it ensure
accountability and performance? The word comes in to the people
every time we hear about the scam. The purpose of Corporate
Governance is to increase the overall value of the corporation.
The effectively meeting its financial, social, environmental,
legal and statutory obligations. For a layman the purpose
of Corporate Governance is ____the system and strategies to
minimize the abuse of power by the insiders. For far too long
those who have been entrusted control of resources by society,
corporations and governments have used them to create personal
power and patronage. The purpose of Corporate Government is
to minimize the abuse of resources of power and patronage.
The biggest problem today is not all poverty,
we can live with less than 2$ of a day, problem is of injustice.
We cannot live less than 2$ a day because others are spending
more than 100$ a day where we are living. The biggest responsibility
therefore, ____ ____ ensure that equally distribution of resources
and it is this area where the ____ and those ___ are badly
failed. We therefore, need governance structure which are
dependent, transparent, accountable and responsible. This
is not an easy task. Every one talks about transparency in
corporate governance. No one understand how difficult it is
transparent. In the volatile economy that we are living today
no one has the right answers ____ trying to hit the aim but
often will not succeed. What will you do when you have failed
are been we taught. Why is the world remembering Gandhi much
more many of the ____ such as Lok Manya Tilak, Lala Lajpat
Rai, Bipinchandra Pal whose contribution was not less than
Gandhi. The greatest strength of Gandhi was his transparency,
Chauri Chora was one example. This we have to learn. Unless
the views for a tradition of transparency and mistake in ___
. Economic disadvantage are a indigenous part of business
and there we many to take decision not likely to seeks ___
we therefore, not to train the directors to have ___ admit
their failure.
One of the things is seriously ____ the value
of diversity. Most important talks is brings today the great
value by immersion. The best way to bring ____ heterogeneous
group. Our effort is as much as possible in the ___ of ___
only then we will have to vedic vision of effective wealth
creation.
