On whether the need for corporate governance to reinvent itself, let us review some recent events and research to understand whether some fundamental shifts are happening.

Although the Finance Minister has mentioned that the expected GDP growth this year would be around 7.6 per cent, the Union Commerce Secretary has indicated that growth rate between six per cent and 6.5 per cent would be far more realistic.

Last year, the variation between the budgeted and actual figures for fiscal deficit to GDP and Government borrowings was more than 25 per cent (adverse).

The gap between promised and actual is widening year after year.

In the recent half-yearly health check on the global economy, the World Bank report points that the world had “entered a very difficult phase characterised by significant downside risks and fragility”.

The bank lowered its forecast for global growth this year from 3.4 per cent to 2.5 per cent and also indicated that governments should be preparing for a downturn as bad as that followed the collapse of Lehman Brothers in 2008.

Deloitte's Shift Index shows that the average life expectancy of a Fortune 500 company has declined from around 75 years half a century ago to less than 15 years today, and heading towards five years if no action is taken to change the situation.

Further, the study also shows that long term trend points to continuous erosion of performance and the “topple rate” at which companies lose their leadership positions, has more than doubled, suggesting that “winners” have increasingly precarious positions.

There are three big shifts happening:

Foundation: The fast moving relentless evolution of a new digital infrastructure and shifts in global public policy are reducing barriers to entry and movement

Flow: Sources of economic values are moving from “stocks” of knowledge to “flows” of new knowledge

Impact: Foundation and knowledge flows are fundamentally reshaping the economic playing field

In the midst of a steep recession, when it's all too easy to fixate on dramatic, cyclical events, there's real danger of losing sight of deeper trends.

Strictly cyclical thinking risks discounting or even ignoring powerful forces of long-term change.

In the light of the above, following issues arise which need to be addressed:

Whether the trends of Fortune 500 are relevant to Indian corporates and whether there are any learnings?

How do we reverse the current deteriorating performance trends?

What is the role of the board of directors, audit committee, regulators, Auditors, CFO, CEO, Management, shareholders, and so on?

What are the metrics (financial and non-financial) which should be used to measure and monitor growth and sustainability?

Although, risk management is slowly being adopted by corporates, is it addressing the right risks? For example, risks related to innovation, emerging technologies, talent, social media, urbanisation, global warming, and so on.

What should be the guiding principles for ensuring growth, sustainability and performance improvement?

As a starting point, an understanding of the three big shifts could lead to significant insights about the moves required to reverse the current performance trends.

Deeper, yet strategic , restructuring of firm economics to generate maximum possible value from existing resources;

Development of new management practices to more effectively catalyse and participate in growing knowledge flows; and

Significant innovation in institutional arrangements to drive scalable participation in knowledge flows and reap the increasing returns to performance improvement.

“I believe that the essential problem about the role of business cannot be solved within our current framework of thinking unless we add another element - The element of Trusteeship .”

– M. K. Gandhi

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