Corporate Governance Theory & Practice Pavan Kumar Vijay Past President, ICSI MD, Corporate Professionals Date: 21/04/2010...
<ul><li>Corporate Governance rests with the  Vision and Perception  of the  Leadership </li></ul>
<ul><li>and </li></ul><ul><li>A Leader need to adopt a  </li></ul><ul><li>Vision for Corporate Governance </li></ul>
Corporate Governance Framework Output – Input  = Wealth Created ? Sustainability Happiness and Prosperity of all Stakehold...
Stakeholders in Value Chain SUPPLIERS CUSTOMERS HUMAN RESOURCE Supply Funds, Materials and Services Value Addition and Man...
Principles of Corporate Excellence Fairness to all stakeholders  Mutual Trust, Transparency and Togetherness Unrestricted ...
Infact, these principles are the foundation of  Best Governed Organisations  irrespective of their form and size
<ul><li>Advantages of applying  </li></ul><ul><li>Best Corporate Governance Practices </li></ul>
<ul><li>Growth </li></ul>Growing Revenues Growing Profits Growing Market Value
<ul><li>Widespread Goodwill and Brand Reputation </li></ul>Access to Global Markets Better Access to Human Capital Ready M...
<ul><li>Enhanced Trust and Confidence of all Stakeholders </li></ul>EMPLOYEES INVESTORS CUSTOMERS SUPPLIERS GOVERNMENT AND...
<ul><li>Leading to… </li></ul>
Environment Civil Society Business Society SUSTAINABLE DEVELOPMENT
<ul><li>Commitment to well-being and progress of all stakeholders is our age old mantra </li></ul>
Satyam Vada Dharmam Chara - Taittariya Upanishad
<ul><li>“ Forever speak the   truth  and follow the   dharma ” </li></ul>
<ul><li>Truth  :  Disclosure of Actual State of Affairs (Transparency in operations and transactions) </li></ul>
<ul><li>Dharma   :  “Dharma is for the  stability of society, the maintenance of social order and the general well-being a...
Governance Concept in ‘Ramayana’ <ul><li>To provide  “the maximum happiness for the maximum number of people for the maxim...
<ul><li>“ The Customer is King” </li></ul>- Mahatma Gandhi
<ul><li>This is the soul behind modern </li></ul><ul><li>Marketing Management </li></ul>
Worshipping 33 Crore Godheads signifying various species, plants,  cosmic elements, …
<ul><li>Care for  Panchtatvas -  Prithvi ,  Jal ,  Vaayu ,  Akaash   and   Agni   that make a human being </li></ul>
<ul><li>This is our approach to </li></ul><ul><li>Environment Protection </li></ul>
The four essential principles of Mahatma Gandhi's philosophy Truth ,  Ahimsa ,  Trusteeship  and  Constructive Action
<ul><li>Corporates are also expected  to use their </li></ul>Capacity, Knowledge and Resources Maximisation of stakeholder...
<ul><li>This is our own age old mantra of  </li></ul><ul><li>Good Governance </li></ul>
<ul><li>Corporate Governance </li></ul><ul><li>Theory & Practice </li></ul>
CG – Theory & Practice
CG  In practice - Board Structure <ul><li>No procedure for selection of directors resulting into appointment of relatives....
CG – In spirit <ul><li>Selection of directors from a pool of knowledgeable and respected persons. </li></ul><ul><li>Profes...
<ul><li>Examples from History </li></ul>
Outstanding Performance,  Higher Profits,  Expanded Market Reach and the like   FAILS  to protect a company  which has put...
History has also repeated itself <ul><li>The SATYAM Fiasco </li></ul><ul><li>A mockery of Corporate Governance </li></ul>
The Satyam Fiasco <ul><li>Out casting of Minority Shareholders </li></ul><ul><li>Diversion of property from Company where ...
Secret behind building foundations ..…Only the culture of  strict adherence to good compliance  can keep a company  ahead ...
CORPORATE GOVERNANCE  AT
Company Philosophy on Corporate Governance Corporate Governance standards should go beyond the law. Maintain high degree o...
Board Meetings 2. Drafting of Agenda by Chairman of the Board & Company Secretary in consultation with Lead Independent Di...
Committees Management Audit Committee  – 6 Members – All Independent Directors  (Cl. 49 requires minimum 3 directors) Comp...
Compliance with Non-mandatory requirements <ul><li>Maximum tenure of independent directors is nine years. </li></ul><ul><l...
And That’s what makes Infosys A value driven organization CRISIL – CRISIL GVC Level 1 ICRA – CGR 1
Present Status of CG Practices – The CRISIL Experience Practice Status Equitable Treatment of Shareholders Moderate Transp...
Value Addition - The CRISIL Experience  Stakeholders Status Share Holders High Debt Holders Highest Employees Moderate Cus...
<ul><li>Companies that have  followed these </li></ul><ul><li>principles  of </li></ul><ul><li>Corporate Governance </li><...
<ul><li>Consistently  earned  high returns ,  </li></ul><ul><li>increased their net worth and  </li></ul><ul><li>enhanced ...
<ul><li>Invested significantly in  proactive research and  development </li></ul>
<ul><li>Developed people into ‘ achievers’  than just ‘ performers’ </li></ul>
<ul><li>Dealt ethically  with customers, government and business partners </li></ul>
<ul><li>Maintained and updated their  professional management culture, system and processes </li></ul>
<ul><li>..and accomplished </li></ul>
WINNING EMPLOYEES XCELLENCE GROWING INVESTORS DELIGHTED CUSTOMERS TRUSTED SUPPLIERS SATISFIED GOVERNMENT AND REGULATORS HA...
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Corporate Governance Presentation by Pavan Kumar Vijay at Assocham

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  • A very good Evening to all of you Distinguished Chief Guest Shri L K Advani, Hon’ble Deputy Prime Minister of India, Justice Shri M N Venkatachalliah, Shri M M K Sardana, Shri G N Bajpai, Shri S Gangopadhyay, Shri N K Jain, Members of the Jury, My Fellow Council Members, Senior Government officials, Corporate Executives, Invitees, Members of Profession, Students, Ladies and Gentlemen.
  • Ladies and Gentlemen Corporate Governance rests with the Vision and Perception of the Corporate Leadership
  • and The ICSI has adopted a Vision for Corporate Governance itself
  • The ICSI Parivar follows principles based on ethics and humanity 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
  • In fact, these basic principles are the foundation of Best Governed Organisations, irrespective of their form and size
  • Corporate Governance is not a buzzword, there are so many advantages of applying good corporate governance practices
  • The first advantage is GROWTH Growing Revenues Growing Profits Growing Market Value
  • Companies get Widespread Goodwill and Brand Reputation, resulting into Widening Customer Base Ready Market for New Products Access to Global Markets, and Better Access to Human Capital
  • and Enhanced Trust and Confidence of all Stakeholders INVESTORS EMPLOYEES CUSTOMERS SUPPLIERS GOVERNMENT AND REGULATORS, and SOCIETY at large
  • Leading to…
  • SUSTAINABLE DEVELOPMENT
  • Ladies and Gentlemen Commitment to well-being and progress of all stakeholders is our age old mantra
  • Taittariya Upanishad, which has for ages strengthened our centres of education, contains invaluable advice to students passing out from an institute of learning - Satyam Vada Dharmam Chara
  • “ Forever speak the truth and follow the dharma”
  • Truthful disclosure of State of Affairs i.e. transparency operations and transactions.
  • In the Karna Parva of the Mahabharata Chapter 69 says: Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind i.e. the Overall Governance
  • In Ayodhya Kand of Ramayana, Lord Rama explains the concept of Governance as “ to provide the maximum happiness for the maximum number of people for the maximum period, based as it is on the principles of Dharma –righteousness and moral values.”
  • Mahatma Gnadhi said “The Customer is King”
  • This is the soul behind modern Marketing Management
  • We have been worshipping 33 Crore Gods signifying various species, plants, cosmic elements, … or 33 Crore Components of Nature.
  • We Care for Panchtatvas - Prithvi, Jal, Vaayu, Akaash and Agni that make a human being
  • This is our approach to Environment Protection.
  • The four essential principles of Mahatma Gandhi&apos;s philosophy - Truth, Ahimsa, Trusteeship and Constructive Action are widely quoted the worldover. Gandhi said we don&apos;t own the talent but we are appointed  &amp;quot;Trustees&amp;quot; by God and so we must use the talent to help others, less fortunate or talented than us. The Board of Director being Trustees should work with highest level of integrity and independence and strive for growth of all stakeholders.
  • Similarly, Corporates are also expected to use their Capacity, Knowledge and Resources towards maximisation stakeholders’ value and well-being and progress of humankind (i.e. Dharma) through Transparency, accountability and truthful disclosure of state of affairs (i.e.Truth)
  • This is our own age old mantra of Good Governance.
  • Ladies and Gentlemen Companies that have won ICSI National Award for Excellence in 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
  • Growing Investors Winning Employees Delighted Customers Trusted Suppliers Satisfied Government And Regulators Happy Society That is Excellence, which everyone aspires for and that leads to National Growth
  • Thank You
  • Corporate Governance Presentation by Pavan Kumar Vijay at Assocham

    1. 1. Corporate Governance Theory & Practice Pavan Kumar Vijay Past President, ICSI MD, Corporate Professionals Date: 21/04/2010 ASSOCHAM
    2. 2. <ul><li>Corporate Governance rests with the Vision and Perception of the Leadership </li></ul>
    3. 3. <ul><li>and </li></ul><ul><li>A Leader need to adopt a </li></ul><ul><li>Vision for Corporate Governance </li></ul>
    4. 4. Corporate Governance Framework Output – Input = Wealth Created ? Sustainability Happiness and Prosperity of all Stakeholders Reinvestment Distribu- tion <ul><li>Research and </li></ul><ul><li>Development </li></ul><ul><li>HR Development </li></ul><ul><li>Infrastructure </li></ul><ul><li>Risk Management </li></ul><ul><li>SUPPLIERS </li></ul><ul><li>Adequate Returns </li></ul><ul><li>HUMAN ASSETS </li></ul><ul><li>Adequate </li></ul><ul><li>Remuneration </li></ul><ul><li>CUSTOMERS </li></ul><ul><li>Affordable Prices </li></ul><ul><li>PUBLIC </li></ul><ul><li>Payment of Taxes and Partnership in National Development Projects </li></ul>Wealth Creation Wealth Management Wealth Sharing Enhanced Capabilities Best Management Practices are Vital Here Law and Ethics are Vital Here
    5. 5. Stakeholders in Value Chain SUPPLIERS CUSTOMERS HUMAN 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 Environment PUBLIC PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT
    6. 6. 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
    7. 7. Infact, these principles are the foundation of Best Governed Organisations irrespective of their form and size
    8. 8. <ul><li>Advantages of applying </li></ul><ul><li>Best Corporate Governance Practices </li></ul>
    9. 9. <ul><li>Growth </li></ul>Growing Revenues Growing Profits Growing Market Value
    10. 10. <ul><li>Widespread Goodwill and Brand Reputation </li></ul>Access to Global Markets Better Access to Human Capital Ready Market for New Products Widening Customer Base
    11. 11. <ul><li>Enhanced Trust and Confidence of all Stakeholders </li></ul>EMPLOYEES INVESTORS CUSTOMERS SUPPLIERS GOVERNMENT AND REGULATORS SOCIETY
    12. 12. <ul><li>Leading to… </li></ul>
    13. 13. Environment Civil Society Business Society SUSTAINABLE DEVELOPMENT
    14. 14. <ul><li>Commitment to well-being and progress of all stakeholders is our age old mantra </li></ul>
    15. 15. Satyam Vada Dharmam Chara - Taittariya Upanishad
    16. 16. <ul><li>“ Forever speak the truth and follow the dharma ” </li></ul>
    17. 17. <ul><li>Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions) </li></ul>
    18. 18. <ul><li>Dharma : “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind .” </li></ul><ul><li>- Karna Parva of the Mahabharata. Verse-58 in Chapter 69 </li></ul>
    19. 19. Governance Concept in ‘Ramayana’ <ul><li>To provide “the maximum happiness for the maximum number of people for the maximum period, based on the principles of Dharma – righteousness and moral values.” </li></ul>- Ayodhya Kand
    20. 20. <ul><li>“ The Customer is King” </li></ul>- Mahatma Gandhi
    21. 21. <ul><li>This is the soul behind modern </li></ul><ul><li>Marketing Management </li></ul>
    22. 22. Worshipping 33 Crore Godheads signifying various species, plants, cosmic elements, …
    23. 23. <ul><li>Care for Panchtatvas - Prithvi , Jal , Vaayu , Akaash and Agni that make a human being </li></ul>
    24. 24. <ul><li>This is our approach to </li></ul><ul><li>Environment Protection </li></ul>
    25. 25. The four essential principles of Mahatma Gandhi's philosophy Truth , Ahimsa , Trusteeship and Constructive Action
    26. 26. <ul><li>Corporates are also expected to use their </li></ul>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
    27. 27. <ul><li>This is our own age old mantra of </li></ul><ul><li>Good Governance </li></ul>
    28. 28. <ul><li>Corporate Governance </li></ul><ul><li>Theory & Practice </li></ul>
    29. 29. CG – Theory & Practice
    30. 30. CG In practice - Board Structure <ul><li>No procedure for selection of directors resulting into appointment of relatives. </li></ul><ul><li>No requirements for minimum qualification of directors </li></ul><ul><li>No requirement of training and development of skills of directors. </li></ul><ul><li>Remuneration vs. Responsibility of independent Directors. </li></ul><ul><li>Mockery of independency by appointment of interdependent directors. </li></ul>
    31. 31. CG – In spirit <ul><li>Selection of directors from a pool of knowledgeable and respected persons. </li></ul><ul><li>Professional attitude and capability of independent directors of taking commercial decisions. </li></ul><ul><li>Disclosure of timely and sufficient information to the directors to enable them to participate effectively. </li></ul><ul><li>Independent directors to have an enquiring mind but not just a questioning attitude. </li></ul><ul><li>Development of skills of directors through training. </li></ul>
    32. 32. <ul><li>Examples from History </li></ul>
    33. 33. 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
    34. 34. History has also repeated itself <ul><li>The SATYAM Fiasco </li></ul><ul><li>A mockery of Corporate Governance </li></ul>
    35. 35. The Satyam Fiasco <ul><li>Out casting of Minority Shareholders </li></ul><ul><li>Diversion of property from Company where the promoter has merely 8.5% stake to a company with 100% stake. </li></ul><ul><li>Attempt to turn company sitting on cash into a debt-ridden company. </li></ul><ul><li>Fudging of accounts of thousands of Crores. </li></ul>
    36. 36. Secret behind building foundations ..…Only the culture of strict adherence to good compliance can keep a company ahead on sustainable basis , bring in larger profits…
    37. 37. CORPORATE GOVERNANCE AT
    38. 38. Company Philosophy on Corporate Governance Corporate Governance standards should go beyond the law. Maintain high degree of disclosure levels. When in doubt, disclose. Make a clear distinction between personal conveniences & corporate resources. Management is the trustee of the shareholders’ capital and not the owner.
    39. 39. Board Meetings 2. Drafting of Agenda by Chairman of the Board & Company Secretary in consultation with Lead Independent Director 3. Circulation to all Directors 4. Recommendations for inclusion of items 5. Inclusion of items in the agenda 6. Meetings of Committees 7. Formal Board Meeting with video conferencing facilities to all directors 1. Scheduling of dates of Board Meetings
    40. 40. Committees Management Audit Committee – 6 Members – All Independent Directors (Cl. 49 requires minimum 3 directors) Compensation Committee – 4 Members – All Independent Directors (Non-mandatory under Cl 49) Nomination Committee – 5 Members – All Independent Directors (Not required under Cl 49) Investors’ Grievance Committee – 4 Members – All Independent Directors (Cl 49 requires only the Chairman to be independent) – 0 Pending Complaint Investment Committee – 7 Members – All Executive Directors (Not required under CL 49) Each committee has its detailed charter.
    41. 41. Compliance with Non-mandatory requirements <ul><li>Maximum tenure of independent directors is nine years. </li></ul><ul><li>Dissemination of regular information to investors through e-mail, telephone, face-to-face meetings, road shows etc. </li></ul><ul><li>Presentations are made by executive directors to familiarize the new non-executive directors with the Company’s operations. </li></ul><ul><li>Evaluation of non-executive directors through a peer-evaluation process. </li></ul><ul><li>Whistle blower policy providing direct access of employees to Chairperson of Audit Committee. </li></ul>
    42. 42. And That’s what makes Infosys A value driven organization CRISIL – CRISIL GVC Level 1 ICRA – CGR 1
    43. 43. 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
    44. 44. 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
    45. 45. <ul><li>Companies that have followed these </li></ul><ul><li>principles of </li></ul><ul><li>Corporate Governance </li></ul><ul><li>have </li></ul>
    46. 46. <ul><li>Consistently earned high returns , </li></ul><ul><li>increased their net worth and </li></ul><ul><li>enhanced their shareholders wealth </li></ul>
    47. 47. <ul><li>Invested significantly in proactive research and development </li></ul>
    48. 48. <ul><li>Developed people into ‘ achievers’ than just ‘ performers’ </li></ul>
    49. 49. <ul><li>Dealt ethically with customers, government and business partners </li></ul>
    50. 50. <ul><li>Maintained and updated their professional management culture, system and processes </li></ul>
    51. 51. <ul><li>..and accomplished </li></ul>
    52. 52. WINNING EMPLOYEES XCELLENCE GROWING INVESTORS DELIGHTED CUSTOMERS TRUSTED SUPPLIERS SATISFIED GOVERNMENT AND REGULATORS HAPPY SOCIETY
    53. 53. Thank You
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