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KOLKATA, Jan. 3

CREATING wealth and maintaining a free and just society are essentially two sides of the same coin. Both require broad-based systems of accountability that need to be built into the governance structures of corporations, according to Mr Viren J. Shah, the Governor of West Bengal.

Pointing out that the concept and definition of corporate governance has undergone a sea change in recent times, he said corporates were now more alive to the prevailing social and economic conditions while pursuing business goals. He was speaking at a workshop on `Making corporate governance work — maximising effectiveness of company boards', organised by the World Council for Corporate Governance here on Friday. He said the movement towards more democratic forms of corporate governance by empowering stakeholders was important not only for creating wealth, but also "added to our ability to maintain a free society". Quoting Monks and Minow, he said, "Corporations determine far more than any other institution, the air we breathe, the quality of water we drink, even where we live. Yet they are not accountable to anyone."

Using Nell Minow's words, he said, "Boards of directors are like subatomic particles — they behave differently when observed."

Effective corporate governance, according to him, could be a powerful instrument not only for economic transformation but also for social transformation and ultimately social regeneration.

"I feel that in the ultimate analysis, good governance is all about empowering people, enabling them to have clear goals and ethical values while discharging their functions. They include not only shareholders, but also employees, suppliers, customers and all those who are directly and indirectly associated with the organisation."

Good corporate governance, which should include collaborative governance, according to Mr Shah, was about making all the stakeholders part and parcel of the overall development or growth strategy and not just treating them as any other factor of production or as passive end-users of services provided.

Suggesting that active involvement of stakeholders was more likely to help find better solutions to many corporate challenges, the Governor said the ultimate objective of any organisation, be it in the private or the public sector, or Governments themselves, was to achieve the maximum public good for all its members or citizens. He opined that besides achieving high growth rates, various other considerations such as employees' welfare, customer satisfaction and social responsibilities are also being factored in by the corporations while developing business strategies.

Collaborative governance, according to him, cannot be introduced in the corporate sector, or for that matter in any organisation as an isolated exercise. Unless the masses have the power to be heard at every level of governance, no worthwhile or long-term gain can be expected.

According to Lord Swraj Paul, Chairman of Caparo Group of companies, UK, and Chairman of World Council for Corporate Governance, if people in companies are bent upon fraud, it cannot be called a failure of corporate governance. Businesses want to hide their sins all the time, and this cannot be allowed any longer, he felt. Urging the Press to be far more hostile to such situations, he said there was need for transparency in corporate dealings at all times.

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