“If management is about running the business, governance is about seeing it is run properly”.
Corporate governance is virtually stepping into the shoes of the shareholders, stakeholders, vendors, suppliers and employees by the top management and CEO of the company. It literally implies giving utmost importance to the pillars within which the organisation has been frameworked, justifying thereby the efforts, material, money and more importantly the faith reposed by the respective stakeholders in it.
The pre-eminence of corporate governance relates back to the numerous scandals and failures at major corporations worldwide which necessitated the formulation of Sarbanes Oxley Act in the US during 2002, mentioning Internal Finance Controls as a key signoff for the CEOs and CFOs in their respective annual reports.
Indian regulators, observing the requirement to match up to global standards, enshrined a new Companies Act, 2013 bringing forth higher transparency norms into the regulations.
The annual report of entities requires the directors to testify in the Directors Responsibility Statement that the company’s financial and operating controls are operating satisfactorily. In addition they also have to affirm that all the compliances under various statutes have been fully adhered to in an intellectually honest basis. Code of Conduct has been prescribed in strict compliance for the top management and directors of the entity.
Whistle-blower norms, as a practice, is also gathering momentum. It is quite obvious that the independent directors have an onerous responsibility to ensure that corporate governance, as a norm, stays on top of the Board agenda. As a precursor to this, auditors and directors are also subject to periodic rotation to ensure that the checks and balances are maintained.
Precisely, transparency, accountability, control, trusteeship and ethics, directed essentially to the varied stakeholders, would be the focus of any corporate. Failure to achieve this or for that matter even a diminution in value of any of the above core principles would hamper the public image of the concerned entity which it can least afford.
— K V Ganesh, chief financial officer, Subex