Poverty and Inequality Two
Sources of Terrorism
In
his concluding address to the 400 delegates comprising
business leaders, industrialists and policy makers
representing 20 countries spreading from Chile to Australia
and from Iceland to Italy participating in the 2nd
International Conference on Corporate Governance, Dr Madhav
Mehra, President, World Council for Corporate Governance,
which organised the event, asserted “Inequality and
socio-economic disparities breed hatred against the system
that perpetuates them. These tend to withdraw people into
their shells and lead them to seek redress in the pursuit of
fanaticism. By emphasising the role of transparency and
fairness, corporate governance is not only an instrument of
economic resurgence but also social transformation.
Developing a culture of entrepreneurship through a
wider dispersal of ownership and good corporate governance
based on shared growth for many instead of a few is the surest
way to defeat terrorism. A study of countries, regions and
habitats that breed fanaticism reveals a conspicuous absence
of middle class. The most effective bulwark against fanatic
terrorism is the building of a strong middle class o f
entrepreneurs, investors and shareholders through best
practices in corporate governance.” Dr Mehra called upon the
US to prioritise the expenditure of billions of dollars
earmarked for the war on terrorism and allocate resources to
proactively facilitate good public and corporate governance
systems, that bring about transparency, legitimacy,
accountability, equity, integrity and responsibility.
Dr
Mehra added “ Because of tectonic shift in public values
with the onset of knowledge economy and the increasing
importance of reputational capital, we need to rewrite the
governance rules to take into account the special role of
knowledge. Notwithstanding this, Enron debacle is a wake up
call for all of us. It shows good corporate governance will
not come by writing best codes.
We need to create a culture of transparency by creating
a society which prides in the courage of owning mistakes and
learning from them rather than hiding them and in turn making
more mistakes.” Quoting Einstein, Dr Mehra said “It is not
the mistake that you make which causes the damage. It is the
mistake you make by defending the first mistake that does the
serious damage.” In the case of Enron, mired in several
international controversies, it was the sale of $1.1 billion
worth of company stock within a single year by 29 senior
executives of Enron that caused the bankruptcy of the mighty
energy giant.”
Professor
William Halal of George Washington University presented the
concept of a collaborative enterprise and stated that
“Collaborative problem-solving offers the key to uniting
economic performance and social responsibility.”
Ralph
Ward, the editor of Corporate
Governance Board and Boardroom Insider asserted “Throughout
Asia and the East today,
many nations are now awaking to the “first mover”
opportunity of good corporate governance. Any economy that
hesitates in this race may well find itself at the rear of the
pack rather than in the front.”
The
theme of the conference was “Corporate Governance: Turning
Rhetoric into Reality”. The conference was addressed by
various United Nations and World Bank agencies including UNDP,
IMF and IFC. James Gordon of the IMF called upon emerging
economies to improve their corporate governance systems
especially to finance current account deficits with longer
terms and less speculative funds including foreign direct
investment. He felt that improved corporate governance would
lead to better allocation of capital over time and higher
productivity and growth. Mr Vipul Prakash, the country head of
International Finance Corporation, a member of the World Bank
group, stated that investors are prepared to pay a huge
premium for companies with better governance practices.
Mr
D R Mehta Chairman Stock Exchange Board of India, the
regulator stated: “We are planning to bring some
modifications in the Corporate Governance code as the present
code does not clarify the definitions of independent
directors.”
Lt.
Gen Ahluwalia, Vice President Institute of Directors called
for inclusion of compulsory requirement of a minimum
qualification in company direction such as a diploma developed
by IOD for any corporate director in the next revision of code
for corporate governance.
Earlier
in his inaugural address Dr P. C. Alexander, the Governor of
Maharashtra asserted that good corporate governance has to be
rooted in ethics and values. He said one of the greatest sins
was to avoid
unpleasant facts. He stated that the “corruption in India
was the biggest stumbling block to good governance”. Quoting
Mehbub Ul Haque, the distinguished economist, Dr Alexander
stated “corruption in India is not down stream but upstream,
it travels on wings to bank accounts in Switzerland. It leads
to promotion instead of imprisonment and perpetuates
poverty.”
One
of the most notable sessions was “Legal, legislative and
regulatory framework on corporate governance” addressed by
world’s foremost jurists including the two former Chief
Justices of India, Justice Venkatachaliah and Justice Ahmadi,
Dr A M Singhvi,
former Finance Minister Mr P. Chidambaram, Mr Kapil Sibal and
Mr K. K. Venugopal. All speakers agreed that what was required
was not new codes but a resolve to punish those who are found
guilty of violating the existing codes and thereby set example
for others.
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