The Hindu Business Line : ‘Time to have high standards in corporate governance’

Bangalore, Feb. 19 No amount of additional legislation or regulations will help if a company’s leadership is bent on breaking them; a company’s integrity is only as good as the model its leader sets, according to speakers at a seminar on ‘New challenges in the Companies Bill’ here.

The US Sarbanes-Oaxley Act was considered draconian but has not prevented frauds by many US companies, it was observed at a seminar organised by the Bangalore Chamber of Commerce & Industry.

Biocon Ltd’s CEO, Ms Kiran Mazumdar Shaw, said in the Satyam case, everyone’s eye was off the ball while a Rs 7,000-crore fraud was being committed.

The case, she said, was an aberration and a wake-up call to other companies. As with a person’s health, “there are warning signals when something goes wrong seriously in a company. If corrective action is taken early enough, the organisation can be saved, like a patient,” Ms Mazumdar-Shaw said.

The seminar was discussing the impending Companies Bill that is meant to further refine corporate governance.

Time for introspection

“This is the time to introspect, look at internal practices and see that we have high standards of corporate governance,” she said.

In the last couple of quarters, companies hit by significant mark-to-market losses have been worried that reporting lower profits will affect their market capitalisation. However, in the interest of long-term growth and credibility, these hard decisions have to be taken and transparency should not be sacrificed, she said.

“You cannot use corporate governance to measure frauds or performance… Corporate governance is different from acts of crime or fraud in an organisation,” she said, adding that companies either practise the right thing or they do not.

According to Mr Rostow Ravanan, CFO, MindTree Consulting Ltd, in a company with a strong promoter lobby, the board of directors should protect the interest of minority shareholders.

A company has to simply “follow the right way and not the convenient way.” Conscientious companies keep their information open to all stakeholders and encourage vigilant employees and whistle-blowers, he said.

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