“We think that corporate governance is something that the company directors should take care of, company's managing directors should bother about. Of late, I am thinking that this corporate governance has more to do with student community, because if you don't bother about governance, there is no way the companies can handle it properly,” said Dr V. Gopalan, Director, Janhar Management Consultancy Pvt. Ltd.
He was delivering a Business Line Club lecture, presented by Central Bank of India, at Manakula Vinayagar College of Engineering near Puducherry.
Companies in general bother only about their top line and bottom line but they have a responsibility to the society, he said. But after earning consistent profits year after year, we find some of them collapsing — not only because they didn't have a market for their products and services, but because of unethical business practices, he added.
Dr Gopalan said corporate governance is not just the volume of information. It is transparency about what is done, which allows the successors to know how a decision was arrived at and have document proof for the entire process, he explained.
Dr Gopalan said risks and accountability are an integral part of any activity and good corporate governance means adoption of ethical practices across the value chain in good and bad times. He cited Enron and the subprime crisis in the US as examples of how lack of good governance eventually adversely affected the world economy.
He further said that governance will be a key challenge for the next generation and enhancement of shareholders' value will be meaningless if the ethical standards are not met.
He advised students to be whistleblowers using proper channels and not to compromise on ethical standards. He said this is a global phenomenon, but India is far better because majority of the corporates are family-controlled. He said we should not allow globalisation to affect this.
He concluded: “If only organisations follow good and ethical standards, the price the consumer pays will be relatively less for the products and services.” We can learn from the crises unfolding across the globe and save ourselves, he added.