Corporate Governanceand Sustainable

Development

Corporate Governanceand Sustainable

Development

Pavan Kumar Vijay

Past President, ICSI

MD, Corporate Professionals

Date: 23/02/2010Delhi University

Corporate Governance rests with the Vision and Perception of the Leadership

and

A Leader need to adopt a Vision for Corporate Governance

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 ReturnsHUMAN ASSETS Adequate RemunerationCUSTOMERS Affordable PricesPUBLIC 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

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

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

U

C

E

S

S

D

I

S

A

S

T

E

R

History has also repeated itselfHistory has also repeated itself

The SATYAM Fiasco

A mockery of Corporate Governance

The Satyam FiascoThe Satyam Fiasco

• Out casting of Minority Shareholders

• Diversion of property from Company where the

promoter has merely 8.5% stake to a company with

100% stake.

• Attempt to turn company sitting on cash into a debt-

ridden company.

• Fudging of accounts of thousands of Crores.

..…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

AT

Company Philosophy on Corporate Governance

Corporate Governance standards should go beyond the law.

Maintain high degree of disclosure levels. When in doubt, disclose.

Make a clear distinction between personal conveniences & corporate resources.

Management is the trustee of the shareholders’ capital and not the owner.

Board Meetings

2. Drafting of Agenda by Chairman of the Board & Company Secretary in consultation with Lead Independent Director

3. Circulation to all Directors

4. Recommendations for inclusion of items

5. Inclusion of items in the agenda

6. Meetings of Committees

7. Formal Board Meeting with video conferencing facilities to all directors

1. Scheduling of dates of Board Meetings

Committees Management

Audit Committee – 6 Members – All Independent Directors (Cl. 49 requires minimum 3 directors)

Compensation Committee – 4 Members – All Independent Directors (Non-mandatory under Cl 49)

Nomination Committee – 5 Members – All Independent Directors (Not required under Cl 49)

Investors’ Grievance Committee – 4 Members – All Independent Directors (Cl 49 requires only the Chairman to be independent) – 0 Pending Complaint

Investment Committee – 7 Members – All Executive Directors (Not required under CL 49)

Each committee has its detailed charter.

Compliance with Non-mandatory requirements

1. Maximum tenure of independent directors is nine years.

2. Dissemination of regular information to investors through e-

mail, telephone, face-to-face meetings, road shows etc.

3. Presentations are made by executive directors to familiarize

the new non-executive directors with the Company’s

operations.

4. Evaluation of non-executive directors through a peer-

evaluation process.

5. Whistle blower policy providing direct access of employees

to Chairperson of Audit Committee.

And

That’s what makes

Infosys

A value driven organization

CRISIL – CRISIL

GVC Level 1

ICRA – CGR 1

Present Status of CG Practices – The CRISIL ExperiencePresent Status of CG Practices – The CRISIL Experience

Practice Status

Equitable Treatment of

Shareholders

Moderate

Transparency and Disclosure

Relatively

strong

Composition of Board Scope for improvement

Functioning of Board Moderate

Value Addition - The CRISIL Experience Value Addition - The CRISIL Experience

Stakeholders Status

Share Holders High

Debt Holders Highest

Employees Moderate

Customers High

Suppliers Scope for improvement

Society Scope for improvement

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