Beyond compliance mindset
Unfortunately, one of the most worrisome issues witnessed in the year 2018 has been corporate governance. Be it IL & FS, PNB, Yes Bank, Fortis, ICICI, Jet Airways, Gitanjali Gems, or any other, the way business is conducted has somehow shaken the confidence of stakeholders and the public at large. It is perceived that all is not well in the corporate governance of such big organizations. Company Law 2013 made certain provisions to ensure that corporate governance through board functioning should have a check and balance kind of mechanism to protect the interests of stakeholders and even small investors. For this, provisions were introduced for the appointment of independent directors. To bring gender diversity and empower women on boards, it was mandated to have at least one woman director on the board in listed companies. So, there are two issues - corporate governance and board diversity. Let us look into them one by one.
The important purpose of putting independent directors on boards was to have an independent voice and keep a check and dissent when things don't go in the interest of the company. Their responsibility and liability were also fixed. But according to research reports, it is found that, barring a few, in many cases, either independent directors kept quiet and nodded their heads to the board proposals without viewing them critically or left the board abruptly when it came to turbulence in business governance. The other side is that it is important for the independent directors to provide governance, but the system ought to protect them. Making independent directors liable for acts they have not committed has scared them. Actually, independent directors should not be treated as executive directors. The responsibility for failure or success has to be with the CEO because they have very little control or influence over day-to-day affairs compared to promoter directors. Governance excellence does not come from mere compliance or putting in place statutory safeguards. The value system the directors carry and their ethical behavior patterns carry immense importance.
As far as gender diversity on boards is concerned, studies of the prime database of 2017 and Indian Express.com's research reveal that though the appointment of women directors in listed companies has increased, it has not gone far enough beyond the compliance mindset. In many cases, women directors' appointments are limited to promoters' personal networks or their family members. Women directors are also paid about 50% less compared to their male counterparts, though their presence and contribution to governance are valued.
So, the time for corporates is to go beyond the compliance mindset in both aspects, address the behavioral aspects of board members, and strengthen excellence in governance to increase the confidence of stakeholders.
From India, Delhi
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181Unfortunately, one of the most worrisome issues witnessed in the year 2018 has been corporate governance. Be it IL & FS, PNB, Yes Bank, Fortis, ICICI, Jet Airways, Gitanjali Gems, or any other, the way business is conducted has somehow shaken the confidence of stakeholders and the public at large. It is perceived that all is not well in the corporate governance of such big organizations. Company Law 2013 made certain provisions to ensure that corporate governance through board functioning should have a check and balance kind of mechanism to protect the interests of stakeholders and even small investors. For this, provisions were introduced for the appointment of independent directors. To bring gender diversity and empower women on boards, it was mandated to have at least one woman director on the board in listed companies. So, there are two issues - corporate governance and board diversity. Let us look into them one by one.
The important purpose of putting independent directors on boards was to have an independent voice and keep a check and dissent when things don't go in the interest of the company. Their responsibility and liability were also fixed. But according to research reports, it is found that, barring a few, in many cases, either independent directors kept quiet and nodded their heads to the board proposals without viewing them critically or left the board abruptly when it came to turbulence in business governance. The other side is that it is important for the independent directors to provide governance, but the system ought to protect them. Making independent directors liable for acts they have not committed has scared them. Actually, independent directors should not be treated as executive directors. The responsibility for failure or success has to be with the CEO because they have very little control or influence over day-to-day affairs compared to promoter directors. Governance excellence does not come from mere compliance or putting in place statutory safeguards. The value system the directors carry and their ethical behavior patterns carry immense importance.
As far as gender diversity on boards is concerned, studies of the prime database of 2017 and Indian Express.com's research reveal that though the appointment of women directors in listed companies has increased, it has not gone far enough beyond the compliance mindset. In many cases, women directors' appointments are limited to promoters' personal networks or their family members. Women directors are also paid about 50% less compared to their male counterparts, though their presence and contribution to governance are valued.
So, the time for corporates is to go beyond the compliance mindset in both aspects, address the behavioral aspects of board members, and strengthen excellence in governance to increase the confidence of stakeholders.
From India, Delhi
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