Corporate Governance in India: Aims and Objectives

Corporate governance, in plain terms, refers to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations.
However, an enforced corporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws. To that end, organizations have been formed at the regional, national, and global levels.
In recent times, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise.
Aims and Objectives
It is said that good corporate governance helps an organization achieve several objectives and some of the more important ones include:
• Developing appropriate strategies that result in the achievement of stakeholder objectives
• Attracting, motivating and retaining talent
• Creating a secure and prosperous operating environment and improving operational performance
• Managing and mitigating risk and protecting and enhancing the company’s reputation.
Some aspects covered in the poll include:
• Corporate governance regulations in India
• Corporate governance concerns in India and role of independent directors and audit committees in
addressing these concerns
• Board practices, board oversight of risk management and the importance given to integrity and ethical
values
• Practices that are fundamental to improved corporate governance.
In comparison with developed countries that impose stringent penal and criminal consequences for poor corporate governance, penalty levels in India are considered to be inadequate to enforce good governance. 71 percent of the respondents considered penalty levels to discipline poor and unethical governance to be low. 22 percent of the respondents were either undecided or did not know if the penalty levels are low.
Enforcing Clause 49
In recent years, more and more Indian companies have been raising capital overseas by getting themselves listed on international stock exchanges. These efforts have been accompanied by the Indian government's drive to attract more Foreign Direct Investment (FDI). Both factors have gone hand in hand with the realization that if Indian companies want more access to global capital markets, they will need to make their operations and financial results more transparent. In other words, they will need to improve their standards of corporate governance.
The Securities and Exchange Board of India (SEBI), which regulates India's stock markets, took a major step in this direction a year ago. It asked Indian firms above a certain size to implement Clause 49, a regulation that strengthens the role of independent directors serving on corporate boards. Have these steps made a difference to corporate governance in Indian firms?
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a concept through which organizations consider the interests of society by taking responsibility for the impact their activities have on customers, suppliers, employees, communities and the environment. This responsibility goes beyond compliance with regulations and is about organizations voluntarily taking further steps to improve the quality of life for employees as well as for the local community and society at large.47 percent of the respondents believe that CSR is not high on the agenda of Indian companies. Thirty percent of the respondents were undecided on this aspect.
Integrity and Ethical Values
Indian companies have been focusing on code of conduct and whistle blower mechanism as a fundamental of good governance. Respondents were asked if similar importance was given to integrity and ethical values. Majority of the respondents say that although Indian companies give similar importance to integrity and ethical values, significant scope exists to enhance integrity and ethical values within the organization and the eco-system.
Effectiveness of Corporate Governance
Monitoring the effectiveness of corporate governance practices is also a key concept emerging in India. We asked respondents who should monitor the effectiveness of corporate governance practices. Forty-seven percent of the respondents believe that effectiveness of corporate governance should be monitored by way of corporate governance audits carried out by corporate governance specialists. Twenty-six percent of the respondents believe that it should be monitored by the boards themselves through self-assessment tools. Fifteen percent of the respondents believe that the monitoring should be by way of investors / minority shareholder groups having access to full information and another 12 percent believed that the monitoring should be through rating agencies.
Factors To Improve Corporate Governance
• 85 percent of the respondents think that the remuneration of Chief Executive
Officers (CEO) should be significantly linked to company performance
• Most respondents believe that while steps at introducing the code of conduct
and whistle blower policy have been introduced, there exists a significant need
to enhance integrity and ethical values in the larger eco-system
• 72 percent of the respondents believe it is necessary for an independent and
transparent process to evaluate performance of board members
• Two-thirds believe that exclusive sessions of independent directors are essential
• 47 percent feel that the effectiveness of corporate governance should be
monitored through audits by corporate governance specialists.

Government’s Initiatives
The Ministry of Corporate Affairs has proposed the New Companies Bill 2008 which aims to improve corporate governance by vesting greater powers in shareholders. These have been balanced by greater emphasis on self-regulation, minimization of regulatory approvals and increased and more transparent disclosures. 53 percent of the respondents believe that the new Companies Act might have a limited or insignificant impact in addressing contemporary corporate governance issues in India. 28 percent of the respondents believe that its impact is likely to be positive. The remaining 19 percent were undecided.
In October 2011, the Ministry of Corporate Affairs said it was in favor of introducing a corporate governance index that would offer rankings to companies adopting governance standards. The index would offer rankings for corporate houses adopting governance standards.
The Ministry was keen to introduce a corporate governance policy to take forward the government's efforts towards better governance in companies. It had been worked out and the competition law would be revisited and amendments would be introduced soon.
Supreme Court’s Verdict
In May 2011, the Supreme Court has given a very fair judgment, with far-reaching implications both for the government and India Inc., in the Reliance Industries Limited (RIL) vs RNRL gas pricing case. It has established unequivocally that the production sharing contract between the government and RIL overrides any private memorandum of understanding arrived at between two individuals. In short, it refused to give sanctity to the Memorandum of Understanding (MoU) signed between the two Ambani brothers. This principle had to be established in the interest of corporate governance or it would have created havoc in the corporate world with promoters of public limited, quoted companies coming together and signing MoUs without a care for the shareholders and other stake holders in the company. Till today the shareholders have not okayed the MoU entered into between Mukesh and Anil Ambani when they divided between themselves the empire created by their father, Dhirubhai Ambani.The second important aspect of the judgment is that the natural resources of a country belong to the government and the government has the right to price it and prioritize the beneficiaries. While it is a well known fact, even internationally, that natural resources belong to the government, the government as a monopoly has the sacred responsibility to put the interest of the nation before everything else when deciding on its use and sale price. This is where the judgment has implications that go beyond the Ambani brothers. The petroleum minister has expressed his happiness that the apex court has upheld his contention that the gas in this case belongs to the government and RIL is only a contractor who can market the product. But it will be the government that will decide at what price it should market it, and to whom it should market it. This is a double-edged sword.

Yet Another Defeat of Shiv Sena

The people of Maharashtra have frustrated the Shiv Sena's attempts yet again. The Shiv Sena had been striving to come to the limelight in politics. At all cinema halls where Shah Rukh Khan's movie My Name is Khan was released, huge crowds turned up to watch the movie. It is strong evidence that people of Mumbai have come to realize that both Bal Thackerey and Udhav Thackerey have lost their mental equilibrium because of continuous defeats. The best reply to their threat is what Sachin Tendulkar had given, followed by Rahul Gandhi and now people of Mumbai.

Bal Thackerey's Politics
The kind of politics indulged in by persons like Bal Thackerey, Udhav Thackeray, and Raj Thackerey has become well-known to people of Maharashtra. They are fed up with that kind of politics. That is why during the last parliamentary elections and later the state assembly elections, people had made them to bite the dust, and thereby gave a clear indication that Bal Thackerey's politics has become outdated as Bal Thackerey has also become old. The people had made them to realize that the masses would not let Maharashtra turn into a den of vagabonds and hoodlums, but Bal Thackerey failed to read the writing on the wall.
What the Shiv Sena did after Sachin Tendulkar and Mukesh Ambani said they are Indians and that Mumbai belongs to all Indians, is before people. People paid no heed to what the Shiv Sena said on the issue and gave it a most befitting reply. Thackerey has gone berserk with that reply because of which he made yet another political move by extending the threat to the Australian cricket team that they would not be allowed to play in Mumbai because of attacks on Indians in that country. The dispute was still on when Shah Rukh Khan made a statement on the non-inclusion of Pakistani cricketers in the IPL that he favors Pakistani cricketers to play in the Indian Premier League (IPL).
This plain talk by Shah Rukh Khan was not liked by Bal Thackerey and his followers who began to make derogatory statements against him. They also extended threats that they would not allow his movie My Name is Khan, to be released in Maharashtra. Yet, not only was the film released in Mumbai and other parts of Maharashtra, and elsewhere in country, but also huge crowds thronged the cinema halls to see the film without any fear. It, infact, is a befitting reply to the unconstitutional activities indulged in by the Shiv Sena and Bal Thackerey.

Sharad Pawar-Bal Thackerey Meeting
A couple of days ago, a large number of people had thronged Rahul Gandhi when he visited Mumbai. It had been made clear that people like Bal Thackerey and his followers have lost their voice in Maharashtra. As for the release of the film, Bal Thackerey had indicated a slight change on his stand, yet lest one calls it the impact of Sharad Pawar-Bal Thackerey meeting or something else, the Shiv Sena again began to extend threats to the film. Afraid of these threats, theatre owners had to stop advance booking and hinted not to screen the film in their halls.
Yet, the people of Mumbai and some organizations came out in support of Shah Rukh Khan and, consequently, the film was released. It is not important that the film was released but more important it is that people thronged cinema halls in large numbers to see the film. These crowds included people from all sections, elderly and children alike. All this makes it clear that the threats extended by the Shiv Sena have lost their sting and gone are the days of their policies of provocation.

Role of Government
It further makes it abundantly clear that should the government adopt a strong stand against mischief mongers and provocateurs, it is not a difficult task to rein them in. The fact is that had the Maharashtra Government adopted a strong stand against the Shiv Sena or Raj Thackereky's MNS, had it not given a long rope to a daily like "The Samna" to spread hatred in the name of journalism and had it conveyed a strong message to the goons and hoodlums that their activities would cost them heavily, things today would not have slipped out of hand.
The successful release of My Name is Khan in the world and in India goes to prove that if Mumbai and Maharashtra were to be saved of jungle raj, people there would have to play a more significant role than the government there. The defeat of the Shiv Sena signals the victory of the courage displayed by the people.

Probe Into Rajshekhara Reddy Death To Avoid Complication

From the looks of it there seems to be very little chance of peace being restored in Andhra Pradesh in the near future. Unexpected situations continue to occur. Agitations for a separate Telengana and a united Andhra Pradesh were bad enough, but now the death of former Chief Minister Y.S. Rajshekhara Reddy (YSR) in a helicopter crash accident was the last straw. With a Russian newspaper claiming that the death was actually a murder, the state is, once again, in the grip of turmoil. The Exile has made the sensational disclosure that Reddy's death was not an accident, but the result of a well-laid out conspiracy of which the main conspirator was the "Reliance Group" chairman Mukesh Ambani. It may be recalled that when this conspiracy theory was aired by a TV channel the whole state erupted in turmoil against the Reliance Group. Its head office, petrol pumps, showrooms, and mobile towers were damaged extensively. Effigies of Mukesh Ambani were torched in several places.

Welfare of Poor and Minorities
There is no doubt that Reddy was a very successful politician. Not only at the state level, but also at the nation level he was considered a powerful Congress leader. He had earned this position by untiring hard work. This can be gauged from the fact that this was the second time that he ascended to the highest office of the state. His work for the poor is an example of his selfless service. He started several schemes for the welfare of the poor and minorities which are a model of good governance.
During his tenure, whether it was providing rice at two rupees a kilogram for those below the poverty line, or giving basic medical help to the poor for free under the scheme "Arogya Sri." Through his welfare schemes he carved for himself a place in the hearts and minds of the public of Andhra Pradesh. His success was so tremendous that on his sudden death many people in Andhra Pradesh committed suicide.
Orgy of Anger and Sadness
The public's reaction after the expose by the Russian daily appears to be absolutely natural--to explode into an orgy of anger and sadness. But to take the law into one's own hand is not a wise move; to act violently, especially when the state is going through an extremely difficult period.
Although the accident is being investigated by the union government and has not been completed so far, this sensational new exposure has definitely given a new turn to the investigation and could lead to some delays of the release of the report. The Russian report has said that the discovery of oil in Andhra Pradesh led to the plot to eliminate Reddy.

Motives and Rumors
When the accident occurred on 2 September 2009, suspicions were heard then only from certain quarters and it was being said that his death was not an accident but murder. On hearing this, it was the responsibility of the central and state government to speed up the investigation and to present the report as quickly as possible.
However, more than three-and-half months have passed since the incident occurred but investigations are still continuing. This can lead to suspicions regarding motives and cause rumors to spread. It is probably for this very reason that state minorities minister Ahmadullah has recommended to the state and central governments that investigations into the death of Reddy should be speeded up and also all investigations made so far should be made public to remove their suspicions.

Removing Suspicions
Suspicions, by their very nature are not amenable to reason. It is not wise to reach any conclusions on the basis of rumors. Those who are suspicious should exercise caution and await the report from the government.
Suspicions do not solve any problems but, on the contrary, make them more complicated. It is also the responsibility of the government to complete its report as quickly as possible so that the minds of Reddy supporters can rest by removing their suspicions.