“Governance is not about the budget lines, personal issues, and equipment approvals. It is about Values, and Visions Strategic Leadership" - John Carver
The concept of Corporate Governance emerged in modern India in the 90s due to economic liberalization and the opening of
international boundaries for business.
Although we inherited the term
“Governance” in our Vedic times in different civilizations slowly it got
faded and lost its relevance with competitiveness and thrives to survive in
the markets with the changing times.
No wonder to mention that this resulted
in many top business houses failing to prove their accountability towards the
stakeholders, not being able to fulfill the commitments of board responsibilities, and
focusing more on the aim of profit maximization rather than sustainable development.
The report of the Cadbury Committee on the
financial aspects of Corporate Governance in the U.K. has given rise to the
debate on Corporate Governance in India too.
The concept of “corporate governance” exists in
India since the times when CEOs were called Kings/Rulers. Although today,
designations have changed the universal principles of good governance still
remain the same.
For a better understanding Definition of
corporate governance given by our guardian authority “Institute of Company Secretaries
of India” is:
“Corporate Governance is the application of best management practices, Compliance of law in true letter and spirit and adherence to ethical standards for Effective Management and distribution of wealth and discharge of social Responsibility for sustainable development of all stakeholders”.
This era of global market competition demands
strategic leadership, innovative ideas, compliance with rules and regulations, better
boardroom relations, harmony in policies with shareholders’ interests, and
accountability for customers and employees.
Organizations need value-driven corporate
governance in order to grow, succeed and compete in international markets through efficient
and transparent management systems at all hierarchies.
The adaptability to standards of corporate
governance which are accepted globally is very significant for Indian firms to
showcase the credibility of their products and services. The companies must
focus on improving, enhancing, and upgrading themselves by bringing a more
reliable, integrated, and transparent business approach.
The benefits of adhering to good governance might be a gradual process but once any organization blends with this system, it can see remarkable changes in the performance index.
Structure for effective corporate governance
Corporate Governance in a Small and Medium Enterprise –A road less travelled
Might sound eerie
to many, But yes if the MSME sector gears up for this corporate phenomenon from the
very beginning it can develop a compliant work culture from ground level to
set the direction for becoming a big corporate house.
Often, for small
to medium businesses, corporate governance is termed as “not applicable”. But
what if, such principles are applied to growing a small plant of management to
develop it as a broad organizational culture tree?
I agree that full Board governance is often not necessary in such organizations; nonetheless, some corporate governance practices should be in place as and when required.
For example:
- For very early-stage & medium-sized businesses there might be more than one shareholder and other investors too. The company shall convene meetings and involve the opinions of other stakeholders a little more than a paper formality, which they usually do.
- When the management structure involves only closed family members then, the concept of corporate governance becomes more relevant to avoid future disputes among stakeholders and keep the transparent business model for mutual benefit.
- As the startups or small businesses grow, management must plan to reorganize the board structure and involve another set of advisors/directors who can be technical experts in their field. The benefit of maintaining this diversity is that you can expect the least opinion biases about major decisions of your business.
