VALUE ADDITION TO ENTERPISE THROUGHCorporate governance<br />Pavan Kumar Vijay<br />Managing Director <br />19/01/2010<br />
What is Corporate Governance???<br />
Corporate Governance rests with the Vision and Perception of the  Leadership<br />
and<br />A Leader need to adopt a <br />Vision for Corporate Governance<br />
Wealth Creation<br />Wealth Management<br />Wealth Sharing<br />?<br />Distribu-        tion<br />Happiness and<br />Prosp...
Infrastructure
Risk Management</li></ul>Best Management Practices are Vital Here<br />Law and Ethics are Vital Here<br />Corporate Govern...
Principles of Corporate Excellence<br />Fairness to all stakeholders <br />Fairness to all stakeholders <br />Mutual Trust...
Infact, these principles are the foundation of <br />Best Governed Organizations&apos; <br />irrespective of their form an...
Commitment to well-being and progress of all stakeholders is our age old mantra<br />
Satyam Vada Dharmam Chara<br />				- Taittariya Upanishad <br />
“Forever speak the truth and follow the dharma”<br />
Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions)<br />
Dharma: “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress o...
Corporates are also expected  to use their<br />Capacity, Knowledge and Resources<br />TOWARDS<br />Dharma<br />Maximisati...
This is our own age old mantra of <br />Good Governance<br />
Companies that have followed these<br />principles of<br />Corporate Governance<br />have<br />
Consistently earned high returns, <br />increased their net worth and <br />enhanced their shareholders wealth<br />
Invested significantly in proactive research and development<br />
Developed people into ‘achievers’ than just ‘performers’<br />
Dealt ethically with customers, government and business partners<br />
Maintained and updated their professional management culture, system and processes<br />
..and accomplished<br />
WINNING<br />EMPLOYEES<br />GROWING<br />INVESTORS<br />DELIGHTED<br />CUSTOMERS<br />HAPPY<br />SOCIETY<br />XCELLENCE<br...
“ Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and ad...
Value Addition to Enterprise through Corporate Governance<br />
Growing Revenues<br />Growing Profits<br />Growth<br />Growing Market Value<br />
Ready Market for New Products<br />Widening Customer Base<br />Widespread Goodwill and Brand Reputation<br />Access to Glo...
CUSTOMERS<br />INVESTORS<br />EMPLOYEES<br />Enhanced Trust and Confidence of all Stakeholders<br />GOVERNMENT AND<br /> R...
Leading to…<br />
Environment<br />SUSTAINABLE<br />DEVELOPMENT<br />Business Society<br />Civil Society<br />
Corporate Value without Corporate Governance – The Past<br />COMPANY<br /><ul><li> Loss of reputation in International Market
Loss of Moral Fibre of Corporataions.</li></li></ul><li>Corporate Value without Corporate Governance – The Past<br /><ul><...
Auditors - Independence compromised to obtain lucrative consulting assignments
Employees - Large disparity between the highest and lowest paid employee
Analysts - Ever-greening of Corporate & Stock reports.</li></li></ul><li>Corporate Value without Corporate Governance – Th...
Difficulty in further raising of capital.
Investor Complaints</li></li></ul><li>Corporate Value without Corporate Governance – The Past<br /><ul><li>PRACTICES:
Aggressive accounting practices.
Incompetence of board members and overriding of audit committees .
Dividend linked to short-term revenue growth, EPS and stock price.</li></li></ul><li>Upshots in Legal Framework<br />Claus...
Legal Norms of CG<br />Concept of Independent Directors & Audit Committees<br />Stricter independence standards for Audit ...
ARE SHAREHOLDERS THE ONLY STAKEHOLDERS ? <br />
Corporate Governance Value Chain<br />“Corporate Governance is not related to investors only, though they are most importa...
ROLE OF STAKEHOLDERS<br />Supply Funds, Materials and Services<br />Value Addition and Management of Resources<br />Give O...
Stakeholders’ Stake in Corporate Governance   Value Chain<br />2 : 1 <br />Debt – Equity Ratio<br />2 : 1 <br />Current Ra...
What CG Brings…<br />
Value Addition through CG<br />CORPORATE GOVERNANCE<br />Govt./<br />Regulator<br />INVESTORS<br />LENDERS<br />CUSTOMER<b...
Compliance
Employment
Social Commitment
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Value Addition To Enterpise Through Corporate Governance

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This presentation explains the concept of corporate governance, its framework, its principles and the stakeholders involved in corporate governance value chain. It further explains how corporate governance creates value in an enterprise and enhances its brand image. It also states the parameters of value measurements

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Value Addition To Enterpise Through Corporate Governance

  1. 1. VALUE ADDITION TO ENTERPISE THROUGHCorporate governance<br />Pavan Kumar Vijay<br />Managing Director <br />19/01/2010<br />
  2. 2. What is Corporate Governance???<br />
  3. 3. Corporate Governance rests with the Vision and Perception of the Leadership<br />
  4. 4. and<br />A Leader need to adopt a <br />Vision for Corporate Governance<br />
  5. 5. Wealth Creation<br />Wealth Management<br />Wealth Sharing<br />?<br />Distribu- tion<br />Happiness and<br />Prosperity of all<br />Stakeholders<br />Output – Input <br />= Wealth Created<br /><ul><li>SUPPLIERS</li></ul> Adequate Returns<br /><ul><li>HUMAN ASSETS</li></ul> Adequate <br /> Remuneration<br /><ul><li>CUSTOMERS</li></ul> Affordable Prices<br /><ul><li>PUBLIC</li></ul> Payment of Taxes and Partnership in National Development Projects<br />Reinvestment<br />Enhanced<br />Capabilities<br />Sustainability<br /><ul><li>Research and</li></ul> Development<br /><ul><li>HR Development
  6. 6. Infrastructure
  7. 7. Risk Management</li></ul>Best Management Practices are Vital Here<br />Law and Ethics are Vital Here<br />Corporate Governance Framework<br />
  8. 8. Principles of Corporate Excellence<br />Fairness to all stakeholders <br />Fairness to all stakeholders <br />Mutual Trust, Transparency and Togetherness<br />Mutual Trust, Transparency and Togetherness<br />Unrestricted Communication and Continuous Feedback<br />Unrestricted Communication and Continuous Feedback<br />Sharing Knowledge, Success Stories and Experience<br />Sharing Knowledge, Success Stories and Experience<br />Sharing Happiness and Concerns<br />Helping Each Other – Round the Clock<br />
  9. 9. Infact, these principles are the foundation of <br />Best Governed Organizations&apos; <br />irrespective of their form and size<br />
  10. 10. Commitment to well-being and progress of all stakeholders is our age old mantra<br />
  11. 11. Satyam Vada Dharmam Chara<br /> - Taittariya Upanishad <br />
  12. 12. “Forever speak the truth and follow the dharma”<br />
  13. 13. Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions)<br />
  14. 14. Dharma: “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind.”<br />- Karna Parva of the Mahabharata. Verse-58 in Chapter 69<br />
  15. 15. Corporates are also expected to use their<br />Capacity, Knowledge and Resources<br />TOWARDS<br />Dharma<br />Maximisation of stakeholders’ value and well-being and progress of humankind <br />THROUGH<br />Truth<br />Transparency, accountability and truthful disclosure of state of affairs<br />
  16. 16. This is our own age old mantra of <br />Good Governance<br />
  17. 17. Companies that have followed these<br />principles of<br />Corporate Governance<br />have<br />
  18. 18. Consistently earned high returns, <br />increased their net worth and <br />enhanced their shareholders wealth<br />
  19. 19. Invested significantly in proactive research and development<br />
  20. 20. Developed people into ‘achievers’ than just ‘performers’<br />
  21. 21. Dealt ethically with customers, government and business partners<br />
  22. 22. Maintained and updated their professional management culture, system and processes<br />
  23. 23. ..and accomplished<br />
  24. 24. WINNING<br />EMPLOYEES<br />GROWING<br />INVESTORS<br />DELIGHTED<br />CUSTOMERS<br />HAPPY<br />SOCIETY<br />XCELLENCE<br />TRUSTED<br />SUPPLIERS<br />SATISFIED<br />GOVERNMENT AND<br /> REGULATORS<br />
  25. 25. “ Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.”<br />- The Institute of Companies Secretaries of India-<br />
  26. 26. Value Addition to Enterprise through Corporate Governance<br />
  27. 27. Growing Revenues<br />Growing Profits<br />Growth<br />Growing Market Value<br />
  28. 28. Ready Market for New Products<br />Widening Customer Base<br />Widespread Goodwill and Brand Reputation<br />Access to Global Markets<br />Better Access to Human Capital<br />
  29. 29. CUSTOMERS<br />INVESTORS<br />EMPLOYEES<br />Enhanced Trust and Confidence of all Stakeholders<br />GOVERNMENT AND<br /> REGULATORS<br />SOCIETY<br />SUPPLIERS<br />
  30. 30. Leading to…<br />
  31. 31. Environment<br />SUSTAINABLE<br />DEVELOPMENT<br />Business Society<br />Civil Society<br />
  32. 32. Corporate Value without Corporate Governance – The Past<br />COMPANY<br /><ul><li> Loss of reputation in International Market
  33. 33. Loss of Moral Fibre of Corporataions.</li></li></ul><li>Corporate Value without Corporate Governance – The Past<br /><ul><li>STAKEHOLDERS
  34. 34. Auditors - Independence compromised to obtain lucrative consulting assignments
  35. 35. Employees - Large disparity between the highest and lowest paid employee
  36. 36. Analysts - Ever-greening of Corporate & Stock reports.</li></li></ul><li>Corporate Value without Corporate Governance – The Past<br />STOCKHOLDERS:<br /><ul><li>Loss of Investors Confidence.
  37. 37. Difficulty in further raising of capital.
  38. 38. Investor Complaints</li></li></ul><li>Corporate Value without Corporate Governance – The Past<br /><ul><li>PRACTICES:
  39. 39. Aggressive accounting practices.
  40. 40. Incompetence of board members and overriding of audit committees .
  41. 41. Dividend linked to short-term revenue growth, EPS and stock price.</li></li></ul><li>Upshots in Legal Framework<br />Clause49 of Listing Agreement.<br />Section 192A, 292A etc. in the Companies Act<br />
  42. 42. Legal Norms of CG<br />Concept of Independent Directors & Audit Committees<br />Stricter independence standards for Audit Committees<br />Board Professionalism<br />Whistle Blower Policy<br />Certifications and disclosures<br />Real time disclosure & Shortened deadlines<br />
  43. 43. ARE SHAREHOLDERS THE ONLY STAKEHOLDERS ? <br />
  44. 44. Corporate Governance Value Chain<br />“Corporate Governance is not related to investors only, though they are most important Beneficiary.”<br />
  45. 45. ROLE OF STAKEHOLDERS<br />Supply Funds, Materials and Services<br />Value Addition and Management of Resources<br />Give Opportunity to Co. to Satisfy their Needs<br />SUPPLIERS<br />CUSTOMERS<br />HUMAN RESOURCE<br />Adequate Returns for Funds, Material and Services Supplied<br />Adequate Salary and Security for leading a Happy Life<br />Best Quality Products and Customer Care at Minimum Prices<br />EXPECTATIONS OF STAKEHOLDERS<br />PUBLIC<br />Potential Suppliers, Human Resources and Customers<br />Biological, Economic and Cultural Environment<br />PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT<br />Stakeholders in Value Chain<br />
  46. 46. Stakeholders’ Stake in Corporate Governance Value Chain<br />2 : 1 <br />Debt – Equity Ratio<br />2 : 1 <br />Current Ratio<br />
  47. 47. What CG Brings…<br />
  48. 48. Value Addition through CG<br />CORPORATE GOVERNANCE<br />Govt./<br />Regulator<br />INVESTORS<br />LENDERS<br />CUSTOMER<br />SUPPLIER<br />EMPLOYEE<br /><ul><li>Tax
  49. 49. Compliance
  50. 50. Employment
  51. 51. Social Commitment
  52. 52. Better quality of HR
  53. 53. Better Salary
  54. 54. Benefits
  55. 55. Stability
  56. 56. Confidence
  57. 57. Security of Funds
  58. 58. Safety of interest & principal.
  59. 59. Better & Favorable Credit Terms
  60. 60. Value Creation
  61. 61. Better quality of Products/ Services
  62. 62. Cheaper prices
  63. 63. Value Creation
  64. 64. Favorable terms of supplier agreements</li></li></ul><li>Measurement of Value Addition<br />
  65. 65. Investors<br />Benefits As To Corporate Governance<br />Lenders<br />Customers<br /><ul><li> Increase in Goodwill
  66. 66. Increase in Investment</li></ul>Suppliers<br /><ul><li>Bettercredit terms
  67. 67. Fund security</li></ul>Employees<br /><ul><li>Better quality goods
  68. 68. increase in Goodwill</li></ul>Government<br /><ul><li>More credit
  69. 69. Increase in creditworthiness</li></ul>Regulators<br /><ul><li>Reduction in Employee Turnover
  70. 70. Relaxation of norms
  71. 71. Increase in Goodwill
  72. 72. Relaxation of Norms</li></li></ul><li>Corporate Governance Enhances Brand Value <br />Quality in Board Structure<br />Better Board Management and Practices<br />Contribution of Independent Directors<br />Successful Strategies<br />Adequacy of Controls<br />Independence of Auditors<br />
  73. 73. History is Witness<br />D<br />I<br />S<br />A<br />S<br />T<br />E<br />R<br />Outstanding Performance, <br />Higher Profits, <br />Expanded Market Reach and the like<br />FAILS <br />to protect a company <br />which has put good governance & ethics <br />at the back burner….<br />S<br />U<br />C<br />E<br />S<br />S<br />
  74. 74. Secret behind building foundations<br />..…Only the culture of <br />strict adherence to good compliance can keep a company <br />ahead on sustainable basis , bring in larger profits… <br />
  75. 75. Present Status of CG Practices – The CRISIL Experience<br />
  76. 76. Value Addition - The CRISIL Experience <br />
  77. 77. Thus, Although a lot has been done, but a lot needs to be done.<br />
  78. 78. CORPORATES SHOULD ACT LIKE HONEY BEE WHICH SUCK THE NECTAR OF THE FLOWER WITHOUT EFFECTING THE FRAGRANCE AND PRODUCE HONEY FOR THE WELL-BEING OF SOCIETY.<br />
  79. 79. THANK YOU<br />
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