Corporate governance: From afterthought to top priority

Mayank Jha , Last updated: 20 February 2023  
  Share


As a society, we've come a long way in terms of understanding the importance of corporate governance. The way businesses operate today is drastically different from how they used to function even a few decades ago.

In the past, corporate governance was often treated as an afterthought, with little emphasis placed on transparency, accountability, or ethical decision-making. This led to a number of scandals and corporate collapses that left investors and the public alike questioning the integrity of the business world.

Thankfully, things have changed. Today, corporate governance is a top priority for companies of all sizes. There is a renewed focus on transparency, accountability, and ethical decision-making, with businesses taking active steps to ensure they operate in a responsible and sustainable manner.

Corporate governance: From afterthought to top priority

One of the biggest drivers of this change has been the recognition that good corporate governance is not only the right thing to do, but it also makes good business sense. Companies that prioritize governance and ethics are more likely to earn the trust and loyalty of their customers, employees, and investors.

Moreover, with the rise of social media and the 24-hour news cycle, companies are more accountable than ever before. Any misstep can quickly become a PR nightmare, damaging the company's reputation and bottom line.

So, what does good corporate governance look like in 2023? It involves a commitment to transparency, with companies providing regular updates on their operations and financial performance. It means engaging with stakeholders, including investors, employees, and the broader community, to ensure that their interests are taken into account.

It also means having a robust framework for decision-making, with clear policies and procedures in place to guide ethical behaviour. This includes everything from the way the company handles conflicts of interest to its approach to environmental, social, and governance (ESG) issues.

In short, corporate governance has come a long way since the days of the "wild west" of business. Today, businesses understand that good governance is not only a moral imperative but also a critical component of long-term success. As we move forward, it will be exciting to see how companies continue to prioritize governance and ethics, building a more sustainable and responsible business world for all.

Regulations has played a key role in driving the shift towards better corporate governance. Governments around the world have introduced laws and regulations to ensure that businesses operate in a responsible and ethical manner. This includes everything from anti-bribery and corruption laws to regulations around data privacy and cybersecurity.

Shareholders have also played a role in driving the shift towards better governance. Shareholders are increasingly demanding that companies operate in a more transparent and ethical manner and are using their voting power to hold companies accountable.

Technology has also played a role in promoting better corporate governance. Today, companies have access to powerful tools and platforms that can help them track and monitor their operations in real-time. This allows them to identify potential issues early on and take steps to address them before they escalate.

The rise of sustainability has also had an impact on corporate governance. Companies are recognizing that they have a responsibility to operate in a way that is sustainable and protects the environment for future generations. This has led to a greater focus on ESG issues and a shift towards more sustainable business models.

India as a Global Leader in Corporate Governance

India has made significant progress in recent years towards improving its corporate governance practices, but there is still room for improvement.

Here are some steps that could help India become a global leader in corporate governance.

  • Strengthen legal and regulatory frameworks: India should strengthen its legal and regulatory frameworks to ensure that they are effective in promoting good corporate governance. This could include measures such as introducing stricter penalties for non-compliance and enhancing the role of independent regulators.
  • Improve transparency and disclosure: Indian companies should be required to provide greater transparency and disclosure around their operations and financial performance. This could include measures such as mandating more detailed financial reporting and requiring companies to disclose their ESG performance.
  • Enhance the role of independent directors: Independent directors play a critical role in promoting good corporate governance, but their effectiveness is often hampered by conflicts of interest and other issues. India should take steps to enhance the independence and effectiveness of independent directors, such as requiring companies to have more independent directors on their boards.
  • Encourage shareholder activism: Shareholders can play a key role in promoting good corporate governance by holding companies accountable for their actions. India should encourage greater shareholder activism by providing shareholders with more tools and resources to engage with companies and exercise their rights.
  • Promote diversity and inclusion: Diversity and inclusion are essential components of good corporate governance, but India still has a long way to go in this regard. India should take steps to promote greater diversity and inclusion on corporate boards and in senior management positions, such as introducing quotas for women and other underrepresented groups.
 

Why Company Secretaries are important in this context?

Company Secretaries (CS) play a critical role in promoting good corporate governance in India.

Here are some reasons why Company Secretaries are important in this context.

  • Compliance: Company Secretaries are responsible for ensuring that their companies comply with all applicable laws and regulations. This includes everything from company law and securities regulations to environmental and labour laws. By ensuring compliance, Company Secretaries help to promote good corporate governance and minimize legal and reputational risks for their companies.
  • Communication: Company Secretaries are often the primary point of contact between the board of directors and the rest of the company. They play a critical role in facilitating communication and ensuring that the board's decisions are effectively communicated to the company's employees and other stakeholders. This helps to promote transparency and accountability within the company.
  • Board Support: Company Secretaries provide crucial support to the board of directors, including preparing meeting agendas, drafting minutes, and providing guidance on legal and regulatory issues. By providing this support, Company Secretaries help to ensure that the board operates effectively and efficiently, promoting good corporate governance.
  • Ethics and Sustainability: Company Secretaries are responsible for ensuring that their companies operate in an ethical and sustainable manner. This includes everything from developing policies and procedures to track and report on the company's ESG performance. By promoting ethical and sustainable practices, Company Secretaries help to build a culture of transparency and responsibility within the company.

Role of Company Secretary (CS) in Corporate Governance

  • The Company Secretary is often considered the "guardian" of good corporate governance. They are responsible for ensuring that the company complies with all applicable laws and regulations, as well as internal policies and procedures.
  • The Company Secretary plays a key role in facilitating communication between the board of directors and the rest of the company. They are often the point of contact for shareholders and other stakeholders and are responsible for ensuring that their concerns are heard and addressed.
  • The Company Secretary is also responsible for ensuring that the board of directors operates in an effective and efficient manner. This includes everything from scheduling meetings and preparing agendas to providing training and support to board members.
  • The Company Secretary plays a critical role in ensuring that the company operates in an ethical and responsible manner. They are responsible for ensuring that the company's policies and procedures are aligned with its values and that all employees are aware of and understand their responsibilities.
  • In many companies, the Company Secretary is responsible for overseeing the company's corporate social responsibility (CSR) efforts. This includes everything from developing and implementing CSR policies and programs to tracking and reporting on the company's CSR performance.

Overall, the role of the Company Secretary in corporate governance is a critical one. They are responsible for ensuring that the company operates in an ethical and responsible manner, and that the board of directors is effective and efficient in its decision-making. By working closely with other stakeholders, the Company Secretary can help to build a culture of transparency, accountability, and ethical behaviour within the company.

Examples of better corporate governance in India

There have been several recent examples of better corporate governance in India. Here are a few examples.

  • Infosys: Infosys, a leading IT services company, has been recognized for its strong corporate governance practices. The company has implemented several measures to promote transparency and accountability, including the establishment of a whistle-blower policy and the appointment of independent directors to its board.
  • Tata Group: The Tata Group, one of India's largest conglomerates, has also implemented several measures to improve its corporate governance practices. This includes the appointment of more independent directors to its board and the establishment of a board-level committee to oversee corporate social responsibility (CSR) initiatives.
  • HDFC Bank: HDFC Bank, one of India's largest private sector banks, has been recognized for its strong corporate governance practices. The bank has implemented several measures to promote transparency and accountability, including the appointment of independent directors to its board and the establishment of a separate committee to oversee compliance and risk management.
  • Hindustan Unilever: Hindustan Unilever, one of India's largest consumer goods companies, has also implemented several measures to improve its corporate governance practices. This includes the establishment of a code of conduct for directors and employees and the appointment of an independent director as the company's chairman.
  • Mahindra & Mahindra: Mahindra & Mahindra, a leading automotive and farm equipment manufacturer, has also been recognized for its strong corporate governance practices. The company has implemented several measures to promote transparency and accountability, including the establishment of a separate committee to oversee sustainability initiatives and the appointment of independent directors to its board.
 

these examples demonstrate that good corporate governance practices are increasingly becoming a priority for companies in India. By implementing measures to promote transparency, accountability, and ethical behaviour, these companies are setting a positive example for others to follow.

Overall, the shift towards better corporate governance has been driven by a combination of factors, including regulations, laws, shareholder activism, technology, and the rise of sustainability and shareholder awareness. As we move forward, it will be important for companies to continue to prioritize governance and ethics, building a more sustainable and responsible business world for all.

Join CCI Pro

Published by

Mayank Jha
(Cs student)
Category Corporate Law   Report

1 Likes   1989 Views

Comments


Related Articles


Loading