N Kumar talked to Focus, the magazine from Central Bank of India, that featured a discussion on 'New thrust on Governance in liberalised economy'. Excerpts from the interview:
Do you think that proper governance
is given the due importance by all the
enterprises?
Corporate governance is a process .
Sitting on this side. I would say companies tick mark that this is done and that is met with. But the crux of corporate governance is transparency of operations. World over, we have good companies and the others. Good companies follow corporate governance - contributed by a competent and socially responsible board and they even try to improve the standards. It is in my view, a 'continuing process'. It is not just meeting certain norms like section 49 in the Company's Act.It is a route to 'excellence in management'. It is the route to be more responsive in benefiting the shareholders and customers. It is a societal responsibility to run a company on merits and certain standards. I think by and large the corporate enterprises are aware of this and are on the road to following it.
Do you think that the corporate governance issue is given due consideration in the real corporate management of enterprises in India?
What in your view are the major issues in evolving an ideal pattern of corporate governance?
I think the issue is one of mindset.
The simple mechanism is to draw procedures and follow them strictly. A corporate enterprise should have the prime objective of conducting business as per ethical standards which ultimately makes a company a good or bad one. Ethics in business is of utmost importance. When we violate ethical standards the gains however big will be short lived. So the real issue in building up an effective corporate governance system is the genuineness in the management's ethical stance. The ultimate focus of business is people and the governance objective should facilitate in reaching them . Another major aspect is that of risk assessment and risk mitigation. Anticipation and preparedness to risks that are material to the growth and credibility of the organisation is a factor that should figure in all governance patterns.
What is good corporate governance...?
An internal control mechanism of an organisation based on procedures,processes and managerial commitment . It brings good reputation for the company. The governance pattern should not only be good but appear to be good. It is not cosmetic but
something embedded in the company's DNA. It is an essential thing for a company. Good corporate governance merges in an organisation out of conscious efforts to achieve it.
It has to be textured by the skill groups in various spheres and monitoring bodies like audit committee, expenditure commit tee ,purchases committee , etc .
Corporate governance is not just keeping things in order for the present but to prepare and place the enterprise in a future responsive mode. It does not come through mere ambitions. A company has to work hard to be in the right place in the business to look to a greater space in the future. Good corporate governance therefore serves to keep an organisation in a place of comfort.
Do you think that the growth prospects
in the economy will serve as a push-
factor for better governance?
Yes. It is. The prospects of higher economic growth,more reforms and larger exposure to technology are now routes to make our corporate enterprises more efficient and future ready. Naturally this is an opportunity to improve our
governance capabilities.
It hink that the opportunities coming to Indian companies for global business opens up new vistas to better governance. When we enter foreign markets we have to tone up our accounting systems, operating models, technology efficiency and management techniques matching with internationalpractice.
For example The Sanmar group is now acquiring businesses in Germany, Egypt and the U.S. While doing so we find that it demands different transparency me chanisms,and accounting skills. Further more, w h e n we discuss these aspect sin our Board, it becomes imperative to analyse various matters with a global perspective. Our vision has to enlarge. Indian IT companies while discussing foreign operations earlier analysed only with a focus on foreign exchange. Now the situation has changed.
With Indian companies getting listed abroad and acquiring foreign companies they have to now analyze not merely exchange variations but a whole lot of management aspects and market related matters. The economic and business growth opportunities have great modifying effect on our management perceptions.
Finally,what in your view should be the priority area in a company's governance objective.
STAKE HOLDERS-is them a in priority followed by People, Societal welfare and Interests of the customers by offering them the best of products and services; Interests of the employees as they are the people making things happen; meeting the legal and moral obligations in business; and of course, moving forward to the future with commitment and confidence.
I believe that the collective wisdom of the Board and top management of an enterprise is sure to make it when it is bound by the ethics in business.