What happens within boardrooms of companies has a direct bearing on
corporate governance, and the character and value systems of the
directors and the time and inclination they have to exercise close
and constant supervision influence the happenings within the
boardrooms. This proposition would have seemed self-evident, but for
the sinking like the Titanic Enron, Anderson, Worldcom, Sunbeam, and
the like in the US and scandals involving other household names in
the UK, the Netherlands and Italy in the 2000s.
These cataclysmic events showed that the trust of the stakeholders -
investors, customers, bankers and so on — in the competence and
judgment of the boards of these firms had been either wantonly
betrayed or tragically misplaced. It is also obvious that such
disasters are the by-products of sordid human tendencies of greed
and grab-as-grab-can; these are not unique to any particular country
or culture, race or religion, time or clime, but are inherent in any
situation lending itself to such opportunities and temptations.
Two conclusions emerge: First, there is absolutely no room for
complacency. Globalisation does not just mean spread of best
practices but also of worst human traits leading to decay and demise
of even well-off companies, and utter ruin of hundreds of thousands
of investors.
Second, a corollary of the first, is the imperative need for
watchfulness by not only those having a stake in the company, but
also the general mass of citizenry and civil society groups. The
shareholders should keep themselves abreast of the news relating to
the company — the share movements, the turnover, attrition of
personnel, deployment and performance of senior-level executives,
decisions on induction of new technologies, introduction of new
products, mergers, acquisitions and buyouts and other salient
aspects of management. Indeed, the time has come for stakeholders of
each company establishing a representative core group and starting
the practice of having periodical meetings with the Board of
Directors, to brief themselves on the latest developments.
This will inevitably call for a change in Boardroom dynamics from
the present one of directors going by the say-so of the top
executives to one of critical and searching examination of every
issue which is placed before the directors, or comes to their
notice. The committees meant for audit, director nomination,
appointments, compensation, plans and strategies and projects
oversight should have a preponderance of independent directors, hold
frequent meetings and never be shy of asking pertinent questions to
satisfy themselves about the financial and functional health of the
company.
Deep engagement
Ultimately, it is the Board that must hold itself answerable to
stakeholders as well as the society at large for the efficient
running of the company under its charge in conformity with canons of
propriety, probity and prudence, with due consideration for
environmental protection and social responsibility.
As an article (The Era of the Inclusive Leader) in the Web site of
strategy+business puts it: "Boards of directors will need to
encourage constructive disagreement and debate, abandoning consensus
habit as a vestige of the imperial age...Because of intensifying
global competition and ever-higher expectations about corporate
performance, companies now need the board of directors to
proactively offer suggestions, to debate threats and opportunities,
to push back aggressively if management is heading in the wrong
direction, and to make informed judgments. Deep engagement requires
directors to participate in dialogues with customers, channel
partners, suppliers, and employees — not different in concept from
the traditional role of the ideal director, but completely different
from the usual practice. These dialogues in turn require directors
to devote time beyond the quarterly board meetings..."
People look up to the federations of chambers of commerce and
industry to save India from the danger of an Enron-like eventuality.
B. S. RAGHAVAN
© Copyright 2000 - 2006 The Hindu Business Line
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