India News and Features Alliance (INFA) - Improving Corporate Governance:ACCOUNTABILITY & FAIRNESS NECESSARY,Dhurjati Mukherjee,5 October 200

The need for strengthening corporate governance has emerged as a key factor in today’s world to keep pace with rapid growth, both of the industrial and services sectors and of the economy as a whole. Moreover, with competitiveness becoming very crucial in countries of the Third World, better governance of corporates has become imperative. As is well known, the governance framework encourages efficient use of resources along with accountability for the stewardship of those resources.

The reason why corporate governance has assumed such importance in recent times is mainly attributed to the entry of private capital as the primary source of funds for investment. Another vital reason for this is the increasing advances in information and communication technology, which necessitates better performance and higher productivity. All aspects of grievance have become vital to maintain a high standard of growth that is the cry the world over and specially for the over populated countries of the Third World.

Corporate governance and global competitiveness emerged as the key subjects at the annual conference of the Institute of Company Secretaries (ICSI) where even foreign delegates participated in the three-day deliberations at Kolkata. Along with initiatives taken by the private sector, the Government has also to come out with reforms that would increase investment, build up investor confidence and take such other measures that would contribute to growth of business and employment.

This was reiterated by Prem Chand Gupta, Union Minister of Company Affairs, at the inaugural session, adding that his Ministry was in the process of finalizing the Law on Limited Partnership (LLP), so that mega partnership firms would enable Indian businesses to participate more effectively and make globalization more meaningful.

However, it was the second day that witnessed important technical presentations on the core subjects of competitiveness and governance. The most notable one was that of Bibek Deb Roy of the PHD Chamber of Commerce who observed that the outflow of Indian investment has been more than the inflow of foreign direct investment. While he stressed that effective action of the Government was called for in strengthening infrastructure, particularly power and roads, the problem of lack of skills and administrative reforms have also to be addressed, if we are to achieve GDP growth rate of 8+ per cent.

The theme of corporate governance was tackled very well by Abhijit Mukhopadhyay of the Hinduja Group (stationed in London) who pointed out that in the era of knowledge economy and globalization, the need for effective management of IPRs had increased manifold. Protection of the intellectual property rights was becoming a major concern for the global concerns due to infringement cases being faced by these companies either in their own territory or outside, he added.

In the same tenor, B.B. Chatterjee of the ITC group observed the need to keep into account the emerging trends of company law for good governance, transparency through enhanced disclosures, increased accountability on corporate management and increasing the attractiveness of the country as a preferred destination.

The ICSI President, H.M. Choraria, delved into the question of governance in his presentations as also in his interview with the undersigned. According to him, the sea changes taking place in the regulatory framework coupled with technological changes and free flow of information to increase competitiveness and efficiency have necessitated the need to improve corporate governance in many ways. Transparency, disclosure of financial and non-financial information, accountability has been very crucial today for which professionals, specially company secretaries, have a key role to play.

Choraria said that MNCs were not a challenge but an opportunity for Indian industry to increase its efficiency. In fact, he said that the country was steadily being accepted as a knowledge hub as a result of which Indian professionals have been well accepted the world over. The future was very bright in the economic sector provided the principles of corporate governance are assiduously followed. In this connection, he said that a consortium of professionals of different countries is needed and to this end the International Federation of Company Secretaries has been formed with India, Pakistan, Kenya and Bangladesh as members and Sri Lanka and Nepal expected to join shortly.

Thus, corporate governance has to be based on responsibility, accountability, fairness and transparency for which for implementation has to be in three phases: first, to comply the basic requirements of Clause 49 (which came into force from January 2006) that elaborately spells on various aspects of disclosures which are to be made by the Company and elaborate analysis in the corporate governance report which is published in the annual accounts.

Second, the transparency and fairness phase so as to make the organization transparent in all respects to all stakeholders, including employees, who are the pillars of its growth. Third, the organization is not only complaint, transparent and fair but also ethical.

In the session on the international comity of Company Secretaries, delegates from Bangladesh, Sri Lanka, Kenya and Malaysia spoke on emerging the role of this profession in the present economic situation. J.R. Corera, President of ICSA from Sri Lanka, said that the profession in his country cannot be compared to that of India where it is very strong and playing a very effective role in corporate governance.

The presentation of M.N. Geteria, Council member of ICPSK of Kenya, touched on the same theme of the professional competence of Company Secretaries and the need to strengthen the Federation for better coordination and interaction with those of other countries so as to streamline procedures and rules for globalizing the profession.

The ten-member Bangladesh delegation was headed by Mohd Sanaullah, President of ICSMB and also the Vice President of the International Federation, who said that the pressure of changes coming from various directions has transformed the role of the Company Secretary from a mere compliance officer. This necessitated the competence level of the Company Secretary to be of a very high order and called for research and networking through international tie-ups.

There was all-round apperception of the fact that in this era of rapid business and technological changes the need for professional skill, development and good governance was imperative to gear up the process of growth on the Indian economy. This was emphasized right from Anil K. Agarwal, President of ASSOCHAM to Ghanshyam Das, Managing Director of Asia-Pacific NASDAQ Stock Market, both of whom stressed on HR development, organizational development and institutional and legal framework development for better productivity. Some suggestions at improving business/strategies were given by Prof. Sekhar Chaudhuri, Director, IIM, Kolkata.

Corporate governance in the 21^st century has become the most significant aspect of concern for rapidly developing countries like India, which are on the path of leaping ahead in the coming years. Corporate governance, corporate performance and social responsibility have to be the new model in the emerging scenario. New technologies that have created economic, social and cultural opportunities have to be explored and implemented so as to increase productivity and create value, not only for industrial growth but for prosperity of society as a whole. ---INFA