The Hindu Business Line : `Practice, not theory, is the key to corporate governance'

Advertisement

Bangalore March 07 The secret of corporate governance is in its practice and not theory," said Mr Krishnamurthy Shankaran, Group Director (Corporate Affairs), TTK Group, on Wednesday.

He was delivering a lecture on `Corporate Governance and Ethics' at the M.S. Ramaiah Institute of Management, organised by BL Club, Bangalore.

Explaining the clamour for corporate governance, he said that the abuse of corporate veil for selective stakeholders' ends, profit creation by gross exploitation of customer and society, creative and discretionary accounting, increasing foreign investment and opening of offshore listing, growing awareness of the right to information, perceived lack of accountability and passiveness of boards, etc., had increased the need for corporate governance.

Role of board

He said that the board of directors played a key role in promoting good corporate governance.

The boardsshould extend their strategies and think beyond the concerns of maximising value for shareholders and adopt means consistent with the current social responsibility in reaching a company's corporate goals.

For good corporate governance practices, teamwork is essential.

"It's a collective effort. Corporate governance is not the pastime of a CFO or a Company Secretary, but the collective responsibility of the board."

For implementing corporate governance practices, the company should have a balanced board of directors with functional, non-functional and independent directors, with their roles and responsibilities defined clearly, Mr Shankaran said.

The board should have an effective supervisory role over the CEO and functional directors.

Besides, transparent and periodical flow of information sufficient in content to evaluate and manage the company, and full disclosure of related party transaction and review of conflict, are some of the tools of corporate governance.

He also stressed the importance of a code of conduct in every company and how the code should be adhered to by all.

Self-governance

"The route to corporate governance is self-governance," Mr Shankaran said.

Corporate governance is a personal attitude, he said, quoting the Bhagavad Gita to support the view: "Whatever the great man does, others follow."

Therefore, the practice of corporate governance starts at an individual level. "A leader lays down the path for others to follow."

One of the reasons for not following corporate governance practices is ego.

He pointed out that the Corporate Governance Act became a necessity because many companies did not practice it due to poor leadership. "We need a system of values to practice corporate governance."

Earlier, Mr N. Rajashekar, Regional General Manager, The Hindu, Bangalore, stressed on the need for such student-corporate interface in shaping their future.

More Stories on : Education | Corporate Governance | Karnataka

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page