AMCHAM Kolkata Conference on Corporate Governance
Good Governance Makes Good Business Sense
January 22, 2010, 10:00 AM to 4:30 PM at the Park Hotel

The on-going globalisation process provided Indian companies with the context to adopt good corporate governance practices in keeping with the best global standards because Indian operations were becoming an integrated part of the global supply chain through fragmented production processes, said Prof Ronald Jones of the University of Rochester, who provided the global context to the deliberations.

Prof Kaushik Basu (of Cornell University & Chief Economic Advisor to the Union Finance Minister) provided the national context where, the unpleasant tidings notwithstanding, the Chief Economic Adviser to the Finance Minister, found reasons to be hopeful of a 7.5 to 7.8 per cent growth in the economy in the current year with possibilities of a 9 per cent growth in 2010-11 amidst a satisfying savings rate at around 38 per cent of the national income (up from 10 per cent a few decades ago).

Savings rate being a relatively steady indicator and with India realising its demographic dividend around savings at this point of time, Prof Basu hoped economic growth would be at a satisfying clip. The focus would be on poverty alleviation though for which he emphasised the need for a vibrant corporate sector. This, in turn, was dependent on good corporate governance that would attract global investors and help Indian companies going global, often through M&As and help them establish bonds of empathy with host communities where ever they might be and bonds of credibility with customers around the world.

Improved governance standards would not only be vital for the corporate sector but the government sector as well with attitudinal reforms around the bureaucracy being an enabler instead of an obstructer and by bringing in intelligent use of economic logic in the manner the government implements its policies. Prof Basu talked about reforms around the public distribution system for efficient beneficiary targeting and delivery of benefits, for instance.

Dr J. J. Irani, director, Tata Sons, talked of the new company law that is on the anvil being simple, globally compatible, easy on legalese and one that would obviate the need for corporate to constantly go to the government for various dispensations. Emphasising that corporate governance could not be mandated, Dr Irani mentioned a few practices that encouraged good corporate governance: independent audit committees, strong internal audits, separating the chairman and managing director’s functions, among others. Good corporate governance would flower in an ethical ambience in which good governance norms were embedded. Failing this, it would always be possible for a CFO and CEO, working in cahoots, to pull wool over everyone’s eyes, Dr Irani said. Significantly, he said that even the best auditors in the country began their reports with a disclaimer; something that should change.

Board Members are trustees on behalf of all the stake holders and independence is a critical factor for corporate governance. There was a vibrant role for independent directors who should be appointed only on merit and who would be legally protected and adequately compensated as well, Dr Irani said.

Other salient observations:
That Good Governance makes Good Business Sense has been established conclusively by comparing the ethical practices followed by Infosys and Satyam in their business conduct.  Infosys has consistently demonstrated public trust and transparency, whereas Satyam demonstrated astute behaviour bordering on poor ethical practices, even prior to the collapse.

Corporate Governance is a matter of philosophy.  It is about values

Enterprise value is now driven by the core values of an organization, rather than by financial or market share numbers.  Strong core values would ensure good corporate governance and good business.

Rules are also essential for Corporate Governance, as core values and ethics are not practiced by every company.   Investors need to be protected.

Risk management is a very key element in implementing Corporate Governance.  This needs a structured process.  Only then can a copmpany be Risk Intelligent.

Culture alone is not enough to ensure Corporate Governance.  A structure is required to implement the culture. This takes the shape of appropriate and independent Board committees, management committees at the enterprise level and the business unit level.

Transparency is critical for Corporate Governance.  It is also essential to align compensation with the strategic and long term objectives of an enterprise.

Disclosure to all stakeholders is a critical element, particularly around related party transactions.

Protection of Minority Shareholder interests is a key objective of Corporate Governance.

Joydeep Dutta Gupta, summing up the deliberations said that ultimately Corporate Governance can only be ensured by Core Values.  The specific core values required are: Integrity; Transparency; Objectivity; Meritocracy (ITOM).

January 22, 2010 – AMCHAM Kolkata Seminar on Corporate Governance Inaugural Session: Dr. Kaushik Basu, Chief Economic Advisor to the Union Finance Ministry speaking. Seated: Ms. Kalpana Morparia, CEO, J.P. Morgan India, Prof. Ronald Jones of Rochester University, and Mr. Tamal Bandopadhyay, Deputy Managing Editor, Mint


January 22, 2010 – AMCHAM Kolkata Seminar on Corporate Governance Inaugural Lamp being lit by Dr. Kaushik Basu, Chief Economic Advisor to the Union Finance Ministry. Others in the picture Prof. Ronald Jones of Rochester University, and Dr. J.J. Irani, Director, Tata Sons, and AMCHAM Kolkata Chairman Mr. Aniruddha Lahiri


January 22, 2010 – AMCHAM Kolkata Seminar on Corporate Governance - Part of the Audience