cp knowledge cg value additions 29.06.08
TRANSCRIPT
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VALUE ADDITION TO ENTERPISE THROUGHCORPORATE GOVERNANCE
Pavan Kumar VijayManaging Director
04/13/23
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What is Corporate Governance???
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Corporate Governance rests with the Vision and Perception of the Leadership
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and
A Leader need to adopt a
Vision for Corporate Governance
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Corporate Governance Framework
Output – Input = Wealth Created ?
Sustainability
Happiness andProsperity of all
Stakeholders
Reinvestment
Distribu- tion
Research and DevelopmentHR DevelopmentInfrastructureRisk Management
SUPPLIERS Adequate ReturnsHUMAN ASSETS Adequate RemunerationCUSTOMERS Affordable PricesPUBLIC Payment of Taxes and Partnership in National Development Projects
Wealth Creation Wealth Management Wealth Sharing
EnhancedCapabilities
Best Management Practices are Vital Here Law and Ethics are Vital Here
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Principles of Corporate Excellence
Fairness to all stakeholders
Mutual Trust, Transparency and Togetherness
Unrestricted Communication and Continuous Feedback
Sharing Knowledge, Success Stories and Experience
Sharing Happiness and Concerns
Helping Each Other – Round the Clock
Fairness to all stakeholders
Mutual Trust, Transparency and Togetherness
Unrestricted Communication and Continuous Feedback
Sharing Knowledge, Success Stories and Experience
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Infact, these principles are the foundation of
Best Governed Organizations'
irrespective of their form and size
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Commitment to well-being and progress of all stakeholders is our age old mantra
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Satyam Vada Dharmam Chara
- Taittariya Upanishad
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“Forever speak the truth and follow the dharma”
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Truth : Disclosure of Actual State of Affairs (Transparency in operations and transactions)
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Dharma : “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind.”
- Karna Parva of the Mahabharata. Verse-58 in Chapter 69
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Corporates are also expected to use their
Capacity, Knowledge and Resources
Maximisation of stakeholders’ value and well-being and progress of humankind
TOWARDS
THROUGH
Transparency, accountability and truthful disclosure of state of affairs
Dharma
Truth
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This is our own age old mantra of
Good Governance
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Companies that have followed these
principles of
Corporate Governance
have
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Consistently earned high returns,
increased their net worth,
enhanced their shareholders wealth
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Invested significantly in proactive research and development
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Developed people into ‘achievers’ than just ‘performers’
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Dealt ethically with customers, government and business partners
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Maintained and updated their professional management culture, system and processes
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..and accomplished
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WINNINGEMPLOYEES
WINNINGEMPLOYEES
GROWINGINVESTORS
GROWINGINVESTORS
DELIGHTEDCUSTOMERS
DELIGHTEDCUSTOMERS
TRUSTEDSUPPLIERS
TRUSTEDSUPPLIERS
SATISFIEDGOVERNMENT AND
REGULATORS
SATISFIEDGOVERNMENT AND
REGULATORS
HAPPYSOCIETY
HAPPYSOCIETY
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The Institute of Company Secretaries of India
”Corporate Governance is theapplication of best
management practices,compliance of law in letter
and spirit and adherence to ethical standards
for effective management and distribution of wealth
and discharge of social responsibilityfor sustainable
development of all stakeholders”
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Advantages of applying Best Corporate Governance Practices
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Growth
Growing Revenues
Growing Profits
Growing Market Value
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Widespread Goodwill and Brand Reputation
Access to Global Markets
Better Access to Human Capital
Ready Market for New Products
Widening Customer Base
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Enhanced Trust and Confidence of all
Stakeholders
EMPLOYEESEMPLOYEES
INVESTORSINVESTORS CUSTOMERSCUSTOMERS
SUPPLIERSSUPPLIERS
GOVERNMENT AND REGULATORS
GOVERNMENT AND REGULATORS
SOCIETYSOCIETY
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Leading to…
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Environment
Civil SocietyBusiness Society
SUSTAINABLEDEVELOPMENT
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Corporate Value without Corporate Governance – The Past
COMPANY
• Loss of reputation in International Market
• Loss of Moral Fibre of Corporataions.
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Corporate Value without Corporate Governance – The Past
STAKEHOLDERS
• Auditors - Independence compromised to obtain
lucrative consulting assignments
• Employees - Large disparity between the
highest and lowest paid employee
• Analysts - Ever-greening of Corporate & Stock
reports.
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Corporate Value without Corporate Governance – The Past
STOCKHOLDERS:
• Loss of Investors Confidence.
• Difficulty in further raising of capital.
• Investor Complaints
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Corporate Value without Corporate Governance – The Past
PRACTICES:
• Aggressive accounting practices.
• Incompetence of board members and
overriding of audit committees .
• Dividend linked to short-term revenue
growth, EPS and stock price.
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Vs.
Corporate Value without Corporate Governance – The Past
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Reactions in Legal Framework
Clause 49 of Listing Agreement.
Section 192A, 292A etc. in the Companies Act
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Legal Norms of CG
Concept of Independent Directors & Audit
Committees
Stricter independence standards for Audit
Committees
Board Professionalism
Whistle Blower Policy
Certifications and disclosures
Real time disclosure & Shortened deadlines
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ARE
SHAREHOLDERS THE
ONLY
STAKEHOLDERS ?
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Stakeholders in Value Chain
SUPPLIERS CUSTOMERSHUMAN RESOURCE
Supply Funds, Materials and Services
Value Addition and Management of Resources
Give Opportunity to Co. to Satisfy their Needs
Adequate Returns for Funds, Material and Services Supplied
Adequate Salary and Security for leading a Happy Life
Best Quality Products and Customer Care at Minimum Prices
ROLE OF STAKEHOLDERS
EXPECTATIONS OF STAKEHOLDERS
Potential Suppliers, Human Resources and Customers
Biological, Economic and Cultural EnvironmentPUBLIC
PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT
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Corporate Governance Value Chain
“Corporate Governance is not related to investors only, though they are most
important Beneficiary.”
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Stakeholders’ Stake in Corporate Governance Value Chain
2 : 1 Debt –
Equity Ratio
2 : 1 Current Ratio
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What CG Brings…
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Value Addition through CG
CORPORATE GOVERNANCE
INVESTORS LENDERS CUSTOMER EMPLOYEESUPPLIER
•Confidence•Security of Funds
•Safety of interest & principal.•Better & Favorable Credit Terms
•Value Creation•Better quality of Products/ Services•Cheaper prices
•Value Creation•Favorable terms of supplier agreements
•Better quality of HR•Better Salary•Benefits•Stability
Govt./Regulator
•Tax•Compliance•Employment•Social Commitment
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Measurement of Value Addition
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Benefits As To Value Addition
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Corporate Governance Enhances Brand Value
Quality in Board Structure
Better Board Management and Practices
Contribution of Independent Directors
Successful Strategies
Adequacy of Controls
Independence of Auditors
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Present Status of CG Practices – The CRISIL Experience
Practice Status
Equitable Treatment of
Shareholders
Moderate
Transparency and Disclosure
Relatively
Strong
Composition of Board Scope for improvement
Functioning of Board Moderate
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Value Addition - The CRISIL Experience
Stakeholders Status
Share Holders High
Debt Holders Highest
Employees Moderate
Customers High
Suppliers Scope for improvement
Society Scope for improvement
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Outstanding Performance, Higher Profits,
Expanded Market Reach and the like FAILS
to protect a company which has put good governance & ethics
at the back burner….
History is Witness
S
U
C
E
S
S
D
I
S
A
S
T
E
R
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..…Only the culture of strict adherence to good compliance can
keep a company ahead on sustainable basis , bring in larger
profits…
Secret behind building foundations
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Thus, Although a lot has been done, but a lot needs to be done.
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CORPORATES SHOULD ACT LIKE HONEYBEE WHICH SUCK THE NECTAR OF THE FLOWERS
WITHOUT EFFECTING ITS FRAGRANCE AND PRODUCE HONEY FOR THE WELL –BEING OF SOCIETY .
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THANK YOU