Well-governed companies have out-performed their peers over the last 20 years. According to Industry captains the growth of governance is the only way out for Indian businesses to responsibly thrive in the long run. So what's good governance? The four remarkable characteristics of well-governed companies are; firstly, they follow best in class governance policies. Secondly, their owners exhibit significant respect for minority shareholders. Thirdly, these companies follow respectable capital allocation. And lastly, they are not dependent on political patronage
In the new India with changed parameters of doing business the new mantra is growth but with good governance. The new aspiring India is surging forward with ethos forcing the old guards to change the way they are accustomed to do business. In a recent study of 500 top BSE companies conducted by Ambit Holdings, it was found that well-governed companies out-performed their peers over the last 20 years. According to Industry captains the growth of governance is the only way out for Indian businesses to responsibly thrive in the long run. This was discussed at the panel discussion 'Growth with Governance' at IMCs 107th Annual General Meeting last week.
What is a well governed company? According to Ashok Wadhwa, Group CEO, Ambit Holdings the four remarkable characteristics of well-governed companies are firstly, they follow best in class governance policies. Secondly, their owners exhibit significant respect for minority shareholders. Thirdly, these companies follow respectable capital allocation. And lastly, they are not dependent on political patronage.
“That governance is the bastion of only large listed companies is a wrong presumption, because the small and medium enterprises of today will be the large companies of tomorrow leading the market indices,”said Wadhwa.
Ratan Tata, Chairman, Tata Trusts, who is mentoring a number of new entrepreneurs including Kunal Bahl of Snapdeal believes that enforcement of good governance is important for growth. “Governance in India in the 90's used to be more intrusive and micromanaged. While it has, over the years, been less intrusive and more transparent; we are weak in enforcement and its equality irrespective of an individual’s or an organization’s background,” he said.
“I feel proud to see a new segment emerging in the country. Young people need to be encouraged and mentored to embrace ethical practices. They deserve a chance to prove themselves shoulder to shoulder with traditional businesses,” said Ratan Tata about mentoring young businessmen.
According to many, the role of government agencies is to carry forward growth of the company through policies and legislations. The initiatives the current government has undertaken, such as the amendments to the companies act can help with the framework of future growth. Tarun Vijay, Member of Parliament, Rajya Sabha said, “Good governance needs to be light and invisible, as in the Mohenjo-Daro times. It ought to be subtle enough to give space to entrepreneurs to conduct business responsibly.”
He said that the business sector should have a more expansive approach in areas such as CSR for the marginal communities like the 8% SC and STs, especially in the north-eastern states of India who contribute to 98% of the insurgencies in the country. “Governance should be a transparent mechanism which drives growth,” he added.
Why corporate governance is much in the limelight ? According to Sudhir Valia, Executive Director, Sun Pharma,the whole economy of the nation depends upon the corporate world, “ hence the focus is so much on the corporate governance,”he said. “Governance is nothing but every individual’s personality getting reflected as the outlook of the organisation at large. Governance is not a cost but an investment, provided not only the top leadership but every employee, every stakeholder is knowledgeable and deeply involved,”he said.
On the subject of Corruption
Says Prabodh Thakker Chairman, Global Insurance Services Brokers Pvt. Ltd, “Corruption in all its myriad forms is one of the biggest enemies of our nation – one that eats into the vitals of our society rendering us globally uncompetitive.
Ratan Tata also feels that the greatest weakness of our nation is inequality. “There should not be any difference in the billionaire doing his business and the street vendor selling his wares. Both should be governed by the law of the land equally. However in reality,this is not happening,” he said.
Enforcement and transparency are the keys to good governance, he said.
According to many, when it comes to public sector, the issue of governance takes a back seat as they are to follow the dictates of the government. Whereas public sector companies are better governed. D. K. Sarraf, Chairman and Managing Director, ONGC lauded the current government for entrusting both the public and the private sector with the frameworks, means and tools to operate in a responsible way. “There is no difference in governance practices of private and public sector, since the rules of game from the government’s side are entirely the same. Today’s government insists on higher governance, more transparency and higher stakeholder management for every market player to make informed decisions,”he clarified. ONGC is a 'Maharatna' company which is lauded for its governance and growth in the public sector.
Ashok Wadhwa summed it up like this,“From the 50s till very recently, growth and trust were missing from the jigsaw puzzle. Only endless governance existed unlike the trust bestowed by government in the western countries. Today, in India, governance backed with trust is neither optional nor seasonal, it is an absolute necessity,” he said.