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Corporategovernance

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Corporategovernance

  1. 1. Corporate Governance Theory & Practice07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 1
  2. 2. Corporate Governance rests with the Vision and Perception of the Leadership07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 2
  3. 3. and A Leader need to adopt a Vision for Corporate Governance07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 3
  4. 4. Corporate Governance Framework Wealth Creation Wealth Management Wealth Sharing ? Distribu- tion Happiness and Output – Input Prosperity of all = Wealth Created Stakeholders SUPPLIERS Adequate Returns Reinvestment HUMAN ASSETS Enhanced Capabilities Adequate Remuneration CUSTOMERS Sustainability Affordable Prices PUBLIC Research and Payment of Taxes and Partnership in National Development Development Projects HR Development Infrastructure Risk Management Best Management Practices are Vital Here Law and Ethics are Vital Here07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 4
  5. 5. Stakeholders in Value Chain ROLE OF STAKEHOLDERS Supply Funds, Value Addition and Give Opportunity to Co. Materials and Services Management of to Satisfy their Needs Resources SUPPLIERS HUMAN CUSTOMERS RESOURCE Adequate Returns for Adequate Salary and Best Quality Products Funds, Material and Security for leading a and Customer Care at Services Supplied Happy Life Minimum Prices EXPECTATIONS OF STAKEHOLDERS Potential Suppliers, Human Biological, Economic and Resources and Customers PUBLIC Cultural Environment PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 5
  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 Clock07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 6
  7. 7. Infact, these principles are the foundation of Best Governed Organisations irrespective of their form and size07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 7
  8. 8. Advantages of applying Best Corporate Governance Practices07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 8
  9. 9. Growing Growing Revenues Profits Growth Growing Market Value07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 9
  10. 10. Widening Ready Market for Customer Base New Products Widespread Goodwill and Brand Reputation Access to Global Better Access to Markets Human Capital07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 10
  11. 11. CUSTOMERS INVESTORS EMPLOYEES Enhanced Trust and Confidence of all Stakeholders GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 11
  12. 12. Leading to…07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 12
  13. 13. Environment SUSTAINABLE DEVELOPMENT Business Society Civil Society07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 13
  14. 14. Commitment to well-being and progress of all stakeholders is our age old mantra07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 14
  15. 15. Satyam Vada Dharmam Chara - Taittariya Upanishad07/04/12 04:43 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 15
  16. 16. “Forever speak the truth and follow the dharma”07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 16
  17. 17. Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions)07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 17
  18. 18. Dharma : “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind.” - Karna Parva of the Mahabharata. Verse-58 in Chapter 6907/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 18
  19. 19. Governance Concept in ‘Ramayana’ 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.” - Ayodhya Kand07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 19
  20. 20. “The Customer is King” - Mahatma Gandhi07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 20
  21. 21. This is the soul behind modern Marketing Management07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 21
  22. 22. Worshipping 33 Crore Godheads signifying various species, plants, cosmic elements, …07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 22
  23. 23. Care for Panchtatvas - Prithvi, Jal, Vaayu, Akaash and Agni that make a human being07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 23
  24. 24. This is our approach to Environment Protection07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 24
  25. 25. The four essential principles of Mahatma Gandhis philosophy Truth, Ahimsa, Trusteeship and Constructive Action07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 25
  26. 26. Corporates are also expected to use their Capacity, Knowledge and Resources TOWARDS Dharma Maximisation of stakeholders’ value and well- being and progress of humankind THROUGH Truth Transparency, accountability and truthful disclosure of state of affairs07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 26
  27. 27. This is our own age old mantra of Good Governance07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 27
  28. 28. Corporate Governance Theory & Practice07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 28
  29. 29. CG – Theory & Practice07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 29
  30. 30. CG In practice - Board Structure • No procedure for selection of directors resulting into appointment of relatives. • No requirements for minimum qualification of directors • No requirement of training and development of skills of directors. • Remuneration vs. Responsibility of independent Directors. • Mockery of independency by appointment of interdependent directors.07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 30
  31. 31. CG – In spirit • Selection of directors from a pool of knowledgeable and respected persons. • Professional attitude and capability of independent directors of taking commercial decisions. • Disclosure of timely and sufficient information to the directors to enable them to participate effectively. • Independent directors to have an enquiring mind but not just a questioning attitude. • Development of skills of directors through training.07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 31
  32. 32. Examples from History07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 32
  33. 33. History is Witness Outstanding Performance, DS Higher Profits, IU Expanded Market Reach and the like SC FAILS AE to protect a company SS which has put good governance & ethics TS at the back burner…. E R07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 33
  34. 34. History has also repeated itself The SATYAM Fiasco A mockery of Corporate Governance07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 34
  35. 35. The Satyam Fiasco • Out casting of Minority Shareholders • Diversion of property from Company where the promoter has merely 8.5% stake to a company with 100% stake. • Attempt to turn company sitting on cash into a debt-ridden company. • Fudging of accounts of thousands of Crores.07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 35
  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…07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 36
  37. 37. CORPORATE GOVERNANCE AT07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 37
  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.07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 38
  39. 39. Board Meetings 1. Scheduling of dates of 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 directors07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 39
  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.07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 40
  41. 41. Compliance with Non-mandatory requirements • Maximum tenure of independent directors is nine years. • Dissemination of regular information to investors through e-mail, telephone, face-to-face meetings, road shows etc. • Presentations are made by executive directors to familiarize the new non-executive directors with the Company’s operations. • Evaluation of non-executive directors through a peer-evaluation process. • Whistle blower policy providing direct access of employees to Chairperson of Audit Committee.07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 41
  42. 42. ICRA – CGR 1 CRISIL – And CRISIL GVC That’s what makes Level 1 Infosys A value driven organization07/04/12 by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 42
  43. 43. Present Status of CG Practices – The CRISIL Experience Practice Status Equitable Treatment of Moderate Shareholders Transparency and Disclosure strong Relatively Composition of Board Scope for improvement Functioning of Board Moderate07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 43
  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 improvement07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 44
  45. 45. Companies that have followed these principles of Corporate Governance have07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 45
  46. 46. Consistently earned high returns, increased their net worth and enhanced their shareholders wealth07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 46
  47. 47. Invested significantly in proactive research and development07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 47
  48. 48. Developed people into ‘achievers’ than just ‘performers’07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 48
  49. 49. Dealt ethically with customers, government and business partners07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 49
  50. 50. Maintained and updated their professional management culture, system and processes07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 50
  51. 51. ..and accomplished07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 51
  52. 52. WINNING GROWING EMPLOYEES INVESTORS HAPPY DELIGHTED SOCIETY CUSTOMERS SATISFIED TRUSTED GOVERNMENT AND SUPPLIERS REGULATORS07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 52
  53. 53. 07/04/12 04:44 AM by Dr.Rajesh Patel,Director, nrv mba ,email:1966patel@gmail.com 53

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