An effective framework of corporate governance is accepted as the foundation for sustainable growth of Business. The business philosophy on corporate governance has been to adhere to the highest standards of ethical behaviour and fairness to stakeholders.
Transparency, accountability, integrity and professionalism are required to be deeply embedded in the corporation’s culture.
Corporate governance practices are a reflection of the value system encompassing culture, policies, and relationships with stakeholders. Integrity and transparency are key to the corporate governance practices to ensure that gaining and retaining the trust of stakeholders at all times.
In common terms, Corporate governance is about maximizing shareholder value legally, ethically and sustainably.
Corporate Governance is not a destination and more a continuous journey for the Corporation in its pursuit towards achieving the highest standards and in pursuance it striving assiduously to adopt the best global practices.
Good governance practices combined with strong leadership is the inherent strength of the organization.
At Business, the Board exercises its fiduciary responsibilities in the widest sense of the term. Business disclosures seek to attain and maintain the best practices in international corporate governance. Businesses also endeavor to enhance long-term shareholder value and respect minority rights in all its business decisions.
Board diversity is critical. The Companies recognize and embrace the importance of a diverse board in its success. The Board needs to have an ideal combination of entrepreneurship, leadership and professionalism.
Businesses believe that a truly diverse board may leverage differences in thought, perspective, knowledge, skill, regional and industry experience, cultural and geographical backgrounds, age, ethnicity, race and gender, that will help business to retain competitive advantage. The Board Diversity Policy adopted by the Board sets out its approach to diversity.
More number of meetings of the board is also a clearer reflection of empowered boards. In India, the maximum interval between any two meetings did not exceed 120 days, as prescribed by the Companies Act, 2013.
The Corporate Governance policy at larger corporations is to have an appropriate mix of executive, non-executive and independent directors to maintain the independence of the Board, and separate its functions of governance and management.
The Board of Directors is a blend of highly experienced persons of immense repute. It is the necessity of optimal number of executive, non executive and independent directors who ensure that high standards of corporate governance are nurtured and put into practice.
In many Indian Corporations, the Board had the levels of eight members, two of whom are executive directors, a non-executive and non-independent member and five independent directors. Two of the independent directors of the Board are women.
In India, many larger corporations also have three women directors on the Board with rich and wide experience of decades in diverse fields. The concept of Women Directors came up with Companies Act, 2013, where the government added an ordinance and made it mandatory to appoint a women director in the board of directors of Company meeting specific criteria.
Every Listed Company, every Public Company having paid-up share capital of Rs. 100 crore or more and every Public Company having minimum turnover of Rs. 300 crore or more are required to have women directors on the board. Like the roles and responsibilities played by any other Director, a women director acts as an independent director and is responsible for improving corporate credibility and also to improve governance standards of the organization.
The policy of the Businesses on its boards directors’ appointment and remuneration, including the criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under Sub-section (3) of Section 178 of the Companies Act, 2013.
Adoption of Codes for Directors, Senior Management Personnel and Independent Directors are imperative. It is expected that the Codes must be available in the public domain, making it publicly accessible.
The Company board should be abided by well-accepted norms of ethical, moral and legal conduct in all its business operations. The business needed to encourage and promote a culture of intensive deliberations, transparency and impartiality in its dealings with stakeholders and the public at large. It adheres to uncompromising integrity in the conduct of business and does not tolerate corrupt and immoral practices.
Rusen Kumar is the founder and managing editor of India CSR. He regularly writes on Sustainability and CSR.