The CSR culture won’t grow naturally; it has to be nurtured: Dr M. Veerappa Moily

India CSR News Networ

MUMBAI: As the season of corporate scams stretches longer and longer, the pitch for a clean-up has become shriller. In such a milieu, a soul searching introspective debate on the state of corporate governance in India Inc. was just what the doctor ordered and what Corporate Dossier Corporate Governance Seminar 2011 delivered.

Over three engaging panel discussions, a cross section of corporate heavyweights debated and discussed the role of boards and board members last week, at the ballroom of the Taj in Mumbai. Anjali Bansal, MD of Spencer Stuart India, kicked off the first discussion on the role of boards in succession planning.

Former SEBI Chief M Damodaran didn’t waste time in coming down to brass tacks. The ex-regulator hit the nail on its head when he said, “Corporate India has only paid lip service to succession planning.”

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His sentiment was echoed by the other members of the panel. Eminent lawyer Cyril Shroff said that while he believes there are heightened levels of awareness about succession planning, thanks to opportunities and globalisation, a huge amount still remains to be done: “Companies that want to be at the top of their game, have to plan ahead.”

The panelists felt many boards are not even aware that creating a leadership pipeline for top positions was one of their core tasks. On being asked how Mahindra Group handles succession planning at the board level, Arun Nanda said, “Instead of looking at a set of resumes, we encourage our board to meet people from senior management who are up to two levels below the CEO.”

The second session of the day was just as spirited, as they dissected the topic, “Is good governance rewarded?” Though all the panelists agreed that good governance gets rewarded by its investors, customers and employees, each felt some key elements were missing. Panelist Jayant Sinha, partner & managing director, Omidiyar Network India Advisors, said, “If the company is being managed for the benefit of the owner and his family, through dynastic succession and other means, you cannot expect good corporate governance.” Vimal Bhandari, managing director & CEO, Indostar Capital Finance, said Indian business houses are going through a transition towards and check and balances can help in course correction. “In a bid to grow their business, first generation entrepreneurs are often prepared to overstep the line and do things that are not ethically correct.

Institutional investors on the board need to rein them in at such times.” Meera Sanyal, chairperson and country head of Royal Bank of Scotland, was optimistic, citing the recent anti-corruption events as part of the larger change that will bring about better governance. “As a society, we are trying to fix things,” she said. “For example, when we were hit by stock market scams, we went and created a system that is the most transparent in the world. Today, out stock markets compare with the best.”

It was all fireworks in the third session, thanks to the provocative topic: corruption and the role of the board. Pradip Shah, chairman of IndAsia Fund Advisors and a board veteran, started off by saying that boards are themselves not involved in corruption.

“However, what the boards have to deal with is, what’s best for the business, and that sometimes can be a tricky issue given the operating environment in India,” he said. Anil Singhvi, Chairman of  ICan Investments, pushed the envelope by broaching a controversial topic. “Some business houses in India have built a business model on corruption. It’s not speed money of the yore but now the policy framework is being changed, tinkered, or being dictated by the businesses. What are boards in such businesses doing?” he asked.Rahul Bhasin, managing partner, Baring Private Equity Partners, picked on the combative stance and questioned the independence of the independent directors, the guardians of minority shareholders. “Companies are run on the worldview of majority shareholders. To try and suggest that the board can act independent of promoters/majority shareholders, is inane. They are ‘dependent independents’,” he said. The professor on the panel then brought in some facts and figures to show that Indian boards were witnessing an exodus of independent directors. “There is a lack of incentives for board members. You pay peanuts and you get monkeys,” said Krishnamurthy Subramanian, professor of finance at ISB.

The panel, which included Lamon Rutten, managing partner & CEO of Multi Commodity Exchange of India (MCX), discussed the constraints of time and information that the independent directors have to deal with. It’s a fact that being an independent director can be a dangerous if the promoters or management are not clean. Panelists were of the view that independent directors were being given a raw deal and law must protect them. “Putting too much pressure on independent directors is the bureaucrat’s way of finding a scapegoat. Independents directors don’t run the company, they can only influence the decision-making in some ways,” added Pradip Shah. “Independent directors should be absolved of criminal liability that executive directors have to deal with,” added Rutten. The questions just kept coming and the panelists fielded them with elan until Union Corporate Affairs Minister Veerappa Moily came in and took charge of the proceedings.