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An ecosystem of trust

india Updated: May 13, 2013 00:06 IST
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If you look at the track record of some of the most successful companies across the world, there has been one common factor that has been at the centre of their growth story: their ability to adapt to change. Admittedly, change is never easy, but it is also a necessity, for growth.

A very important and revolutionary reform was the transformation of India’s corporate governance framework. For instance, the amendment of Clause 49 of the Listing Agreement of Stock Exchanges, often described as a progressive event, brought in a number of mandatory and recommendatory requirements with a focus on the role and structure of corporate boards, board committees, internal controls and disclosure to shareholders. This change among others in India’s corporate governance framework brought about a transformation for Indian businesses.

Ever since, the role of corporate governance has only become more critical for the success of any organisation. The need for adherence to the corporate governance laws is more compelling now than ever. This is true in the face of the tumultuous economic environment making assessments even more stringent, valuations more modest and risk appetites more meagre.

The reputation of a business and the trust it has earned play a far more significant role in decision-making than any amount of company data and projections presented. Why then does good governance seem like an insurmountable peek for most Indian companies that are still playing catch-up with good governance standards? Why is there a resistance to change?

Organisations today approach corporate governance as a mere requirement. High governance practices must be the key element of an organisation’s culture. Good governance does not come with a cost or a burden but with a significant value addition to the organisation and ultimately benefits the society.

Corporate governance is usually seen as a set of regulations, processes and customs affecting the way a company is administered. However at the heart of good governance are the tenets of trust and transparency, ethical business conduct and a deeper commitment to all stakeholders. The mantra of good governance is simple — Trust, Transparency, Integrity and Ethical Business Practices.

Practising good governance can help any company prime itself for success. Necessities such as consistency and transparency in disclosures and in all business transactions can help promote stakeholder confidence to a great extent. Even raising capital or attracting investors then becomes a much easier task.

Good governance can help inspire confidence not only among external stakeholders but also with internal stakeholders. In a transparent work environment, employees are likely to be the biggest endorsers of ethical business practices.

Good governance can form the ecosystem needed for any business to thrive in and achieve success. Good governance among Indian businesses would be a strong determining factor for India’s position in the competitive global landscape, and as an economic force to reckon with in the future!

Anil Chanana is CFO, HCL Technologies.

The views expressed by the author are personal.