Corporate Governance vital for India’s global position: Secretary, Ministry of Corporate Affairs

Secretary says MCA and SEBI working towards common goal : No one-size-fits-all but compliance non-negotiable

7 fundamental principles behind SEBI Committee recommendations : Uday Kotak

Mumbai – Mr Injeti Srinivas, Secretary, Ministry of Corporate Affairs asserted that adoption of highest standards of corporate governance is imperative for India to reach the global position the economy aspires for. He highlighted how it is vital for companies to ensure sustainable socially responsible behaviour and internalise governance principles rather than it being superficially achieved. Mr Srinivas was addressing the 12th Corporate Governance Summit organized by Confederation of Indian Industry (CII) at Mumbai today.

Sending out very positive signals of harmonious regulation, Mr Srinivas enforced that MCA and SEBI are working towards a common goal of zero tolerance towards unethical behaviour and non-compliance. Acknowledging that corporate governance cannot happen in isolation by the Board or the Regulator and there is no one-size-fits-all, he enumerated that companies do not have an option but to follow governance standards lest they will face the consequences.

Mr Uday Kotak, Vice President, CII; Executive Vice-Chairman and Managing Director, Kotak Mahindra Bank Limited and Chairman, SEBI Committee on Corporate Governance Chairman charted the fundamental principles driving the Committee recommendations. He highlighted seven of the principles including fairness to shareholders; commitment of Board members towards long term strategy and vision rather than short term quarterly pressures; sharpening of roles between stakeholders; role of fiduciary agencies; ease of doing business; stewardship code for institutional investors; and PSU governance.

Mr Kotak explained the need for enforcing the trusteeship model of governance whether it is the promoter, Board or shareholder to ensure that each stakeholder gets their fair share. Speaking on the role of fiduciary agencies, he highlighted the role of individual directors, auditors, rating agencies in protecting trust by stakeholders. Cautioning against the trend of managements and Boards being disproportionately focused on quarter to quarter growth., he stressed the need for long term approach.

Chairman, CII National Council on Corporate Governance Mr Keki Mistry, Vice Chairman and CEO, HDFC Limited highlighted that there is recognition in India that companies committed to good governance have a distinct competitive advantage along with enhanced reputation and investor trust. As a result, a majority of Indian companies are aware that robust governance has a premium and if their policies and practices fail to meet high ethical standards, they will be exposed to serious reputational risks and business failure.

Providing an overview of the current developments on corporate governance, he asserted the importance of sound principles of governance as necessary tools for long term development and sustainability of a company. He charted global trends in corporate governance that have emerged over the last few years including increasing expectation around the oversight role of the board which includes the overall strategy planning, investor engagement and executive succession planning. He said there is focus on the composition of the board and particular attention is being paid to directors’ skill profiles, diversity and the making of a robust mechanism of board refreshment that goes beyond the box ticking exercise. Boards are increasingly expected to play a more proactive role in risk management particularly cyber security risks and markets are giving greater weightage to companies that provide sustained value creation with greater focus on environmental, social and governance issues.

Delivering the Multilateral Partner Outlook, Mr Ramesh Ramanathan Manager, IFC South Asia International Finance Corporation said that India’s improved rankings in the 2017 World Bank Ease of Doing Business report 2017 to move within the top 100 countries demonstrates the continued implementation of good corporate governance practices. IFC believes that the SEBI’s recent corporate governance committee recommendations and IFC-BSE scorecard launched in December 2016, help India strengthen its governance standards and be more attractive to investors.

Mr P R Ramesh, Chairman, Deloitte India acknowledged how Regulators are responding to the governance evolution in imposing global standards of corporate governance on established corporates with a plausible fast tracked extension to regulate start-up businesses. He said that Institutional investors will continue their push for more uniform standards of corporate governance globally, while also increasing their expectations of the role that boards should play in responsibly representing shareholders. The movement for companies and investors to adopt a more long-term orientation has gained momentum, with several large institutional investors now pressuring boards to demonstrate that they are actively involved in guiding a company’s strategy for long-term value creation, he said.

Earlier delivering the welcome remarks, Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry congratulated the initiatives of the Ministry of Corporate Affairs for their perfect alignment with the needs of the current regulatory environment. He charted CII’s role in the evolution of corporate governance in the country asserting the need to ensure that efforts are sustainably aimed at creation of a facilitative streamlined and harmonized regulatory environment that promotes voluntary adoption of best practices and self-regulation by corporates without warranting additional regulations.

Speakers commended CII for its sustained efforts in facilitating the enhancement of corporate governance standards in India. The day long Summit is the flagship event of CII in the governance domain. Various sessions deliberated upon through the day included Role of High Performance Boards in building sustainable ethical organisations; Relationship between governance and management action translating into good performance; Governance in Start-ups, Distressed companies and MSMEs and Accounting, Auditing and Risk Management Practices with focus on cyber security.