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Monday, January 19, 2009

Is India Inc Ready For Corporate Governance ?

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Posted by: danish Ahmed 1:52 AM

Corporate governance is the new buzzword in the Indian white-collar community coming in the wake of Satyam debacle. Coming from a background that has had nothing to do with commerce, economics or business management, I find it difficult to understand if there is a greater need for corporate governance.

For all I know, more rules, procedures and processes remind me of the good old and inefficient bureaucracy and "the license permit raj" of pre-reforms India. In the Cold War era India's socialistic leanings (more like anti-capitalism) led to rules, processes and governmental control that most Indian corporates were either state controlled or dominated by big business houses. It did not allow the middle-class, traditionally business oriented, to dream big in terms of business.Economic reforms changed all that, private players took over and the result 15 years later is not bad at all. It is not just the big business houses and multinational companies that have been successful, of course they have had an important role but it is the small businesses that have been driving the engine of growth. Lots of energy, determination and innovation are the hallmarks of this epoch. It is also the period when entrepreuners and spirited individuals from rural and small towns of India emerged as key players. Did they know or follow management rules or processes?

I don't think so! Lets take Lalu Yadav as case-study. Lalu was seen by a lot of literati as the perfect example of illiterate, ignorant political leader who doesn't deserve to be in the legislature. While this impression may have weakened with passage of time, it is a fact that he lacks absolutely the sophistication and finese synonymous with corporate leadership. Yet he tranformed railways in a manner none could have imagined. I guess Lalu didn't go much into the established corporate strategies and plans. What he did instead is, apply his own desi business sense and unorthodoxy. The same goes for dabbawalas, Dhoni and scores of middle-class Indians who now lead India. Most of these people who have gone on to become corporate leaders have shown dictatorial traits. Should that be tolerated?

Before answering that question let us take a look at the fact that despite phenomenal economic growth, India is still the home of every third poverty-stricken person in the world. As things stand, this gulf between poor and others is set to increase unless the overall economy grows at a faster pace. History shows that raapid development has been a reality in autocratic states more than in democratic ones. So, as long as corporate leaders act dictatorial within their own organization,on purely professional issues and have no major or direct role in socio-political aspects of society, they can be seen as necessary evil. Of course, the government should ensure that the interests and basic rights of the employees and customers are safe-guarded and the value generated contribute to the society as a whole.

P.S: As I have said before, this is an area I am not knowledgeable in and I may be wrong. But do leave a comment to correct me :)

1 comments :

Byapti said...

To my knowledge corporate governance is something to do with overall transparency in functioning of any organization. Normally, this concept is successful in those companies, who have a strong vision. At the same time, they look for long term sustainability of the organization. To meet the vision, apart from formulating and implement business strategies, ingredients like values and ethics should be taken into consideration. For this to happen, the promoters and the management of the company, should always try to introspect their actions.

It is quite ironical that some companies, especially, those who are listed in any stock exchange, always look for profitability as the only factor for their survival in a tough competitive environment. It is a fact that both retail and strategic investors always invest or keep on investing in profitable companies. If confidence level of investors is shaken, then company goes into doom. Keeping this apprehension in mind, both promoters and management body of the companies (not all) often try to do accounting malpractices or other unethical things. By this, knowingly and unknowingly, they put themselves into a vicious loop with a hope that time is the best healer of all the ills. But one fine morning they find that water is much above their head.

“Satyam Saga” is an eye-opener for all the Indian companies. Lessons on corporate governance have been taught a lot. Time has come for Indian companies to rise to the occasion and sweep away the dust of bad governance. Otherwise, we will have many “riches-to-rag” stories.

The author tries to give a good insight into corporate governance. But one point I would like to bring to his kind attention that success stories of individuals or organizations do not always go hand-in-hand with individual’s or organization’s value system and ethical outlook.