corporate governance
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Corporate Excellence through
Corporate Governance
Corporate Excellence through
Corporate Governance
Corporate Governance rests with the Vision and Perception of the Leadership
and
A Leader need to adopt a Vision for Corporate Governance
The Institute of Company Secretaries of India
”Corporate Governance is the
application of bestmanagement
practices,compliance of law in letterand spirit and adherence to ethical standards
for effective management and distribution of wealth
and discharge of social responsibilityfor sustainable
development of all stakeholders”
Corporate Governance
"Corporate governance is the system by which business corporations are directed and
controlled.
The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers,
shareholders and other stakeholders,
and spells out the rules and procedures for making decisions on corporate affairs.”
"Corporate governance is the system by which business corporations are directed and
controlled.
The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers,
shareholders and other stakeholders,
and spells out the rules and procedures for making decisions on corporate affairs.”
Corporate Governance FrameworkCorporate Governance Framework
Output – Input = Wealth Created ?
Sustainability
Happiness andProsperity of all
Stakeholders
Reinvestment
Distribu- tion
Research and DevelopmentHR DevelopmentInfrastructureRisk Management
SUPPLIERS Adequate Returns
HUMAN ASSETS Adequate Remuneration
CUSTOMERS Affordable Prices
PUBLIC 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
Stakeholders in Value ChainStakeholders 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
Principles of Corporate ExcellencePrinciples 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
Infact, these principles are the foundation of
Best Governed Organisations
irrespective of their form and size
7 Deadly Sins
7 Deadly Sins Avoid
Wealth without Work Pleasure without ConscienceKnowledge without CharacterScience without HumanityReligion without SacrificePolitics without Principle COMMERCE (BUSINESS) WITHOUT MORALITY
(ETHICS)
THE GLOBAL AGENDA 2010 The Issues
THE GLOBAL AGENDA 2010 The Issues
Rethink 20th century Institutions – redesign them to meet 21st century demands
Need to adapt new models of cooperation – to reconsider ‘one-size-fits-all’ model
New matrix needed to integrate social goals and values.
Need to protect rights of people – to minimize global systematic risks
11
Advantages of applying Best Corporate Governance Practices
Growth
Growing Revenues
Growing Profits
Growing Market Value
Widespread Goodwill and Brand Reputation
Access to Global Markets
Better Access to Human Capital
Ready Market for New Products
Widening Customer Base
Enhanced Trust and Confidence of all
Stakeholders
EMPLOYEESEMPLOYEES
INVESTORSINVESTORS CUSTOMERSCUSTOMERS
SUPPLIERSSUPPLIERS
GOVERNMENT AND REGULATORS
GOVERNMENT AND REGULATORS
SOCIETYSOCIETY
Leading to…
Environment
Civil SocietyBusiness Society
SUSTAINABLEDEVELOPMENT
Commitment to well-being and progress of all stakeholders is our age old mantra
Satyam Vada Dharmam Chara
- Taittariya Upanishad
“Forever speak the truth and follow the
dharma”
Truth : Disclosure of Actual State of Affairs
(Transparency in operations and transactions)
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
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 .
Corporate Social Responsibility is not philanthropy. It is not charity. It is an investment in our collective future
- Dr. Manmohan Singh
Governance Concept in ‘Ramayana’Governance Concept in ‘Ramayana’
To provide “the maximum happiness for the
maximum number of people for the maximum
period, based on the principles of Dharma –
righteousness and moral values.”
- Ayodhya Kand
“The Customer is King”
- Mahatma Gandhi
This is the soul behind modern
Marketing Management
Worshipping 33 Crore Godheadssignifying various species, plants,
cosmic elements, …
Care for Panchtatvas - Prithvi, Jal, Vaayu, Akaash and Agni that make a human
being
This is our approach to
Environment Protection
The four essential principles of Mahatma Gandhi's philosophy
Truth, Ahimsa, Trusteeship and Constructive Action
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
This is our own age old mantra of
Good Governance
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
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C
E
S
S
D
I
S
A
S
T
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Common Factors behind such eventsCommon Factors behind such events
35
Emerging IssuesEmerging Issues
36
..…Only the culture of
strict adherence to good compliance
can keep a company
ahead on sustainable basis , bring in larger
profits…
Secret behind building foundationsSecret behind building foundations
Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…
A Comparison within companies in FMCG Industry with their P/E multiple
41.39
37.36
36.70
31.93
28.79
Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…
A Comparison within companies in Pharma Industry with their P/E multiple
19.37
14.81
14.7
5.35
Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…
A Comparison within companies in Banking Industry with their P/E multiple
6.13 6.25.97
4.81
Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…
A Comparison within companies in IT Industry with their P/E multiple
Companies with better governance is presumed to have a better face and thus greater P/E Multiple and Enhanced Valuations...
Source: Economic Times, dated 1st July, 2010
19.79
19.58
15.85
7.43
9.78
Companies that have followed theseprinciples of
Corporate Governancehave
Consistently earned high returns, increased their net worth and
enhanced their shareholders wealth
Invested significantly in proactive research and development
Developed people into ‘achievers’ than just ‘performers’
Dealt ethically with customers, government and business partners
Maintained and updated their professional management culture, system and processes
..and accomplished
WINNINGEMPLOYEES
WINNINGEMPLOYEES
GROWINGINVESTORS
GROWINGINVESTORS
DELIGHTEDCUSTOMERS
DELIGHTEDCUSTOMERS
TRUSTEDSUPPLIERS
TRUSTEDSUPPLIERS
SATISFIEDGOVERNMENT AND
REGULATORS
SATISFIEDGOVERNMENT AND
REGULATORS
HAPPYSOCIETY
HAPPYSOCIETY
Excellence in Corporate Governance
Corporate Excellence
Social Excellence
National Excellence
Excellence in Corporate Governance leads to National Excellence
Thus, Although a lot has been done, but a lot needs to be done.
Pavan Kumar Vijay Managing Director
Corporate Professionals India Pvt. Ltd.D – 28, South Ext- I,New Delhi 1100049
Tel: +91.11.40622200,Fax: +91.11.40622201
Email: [email protected]
Visit us at:www.corporateprofessionals.com