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"Dinner is ready when the smoke alarm goes off" - Rabaxter

Good Corporate Governance

  • Date Submitted: 08/10/2011 06:23 AM
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What is good corporate governance?

Good corporate governance is characterized by a firm commitment and adoption of ethical practices by an organization across its entire value chain and in all of its dealings with a wide group of stakeholders encompassing employees, customers, vendors, regulators and shareholders (including the minority shareholders), in both good and bad times. To achieve this, certain checks and practices need to be whole-heartedly embraced.

Some considerations in this respect are outlined below:
• Codes of conduct and whistle blower policies are important, but more important is how they are communicated and practiced. It is vital for board members and senior management to lead by example
• The concept of having independent directors is a good one in theory but more important is the process underlying selection of
independent directors – is this process rigorous, transparent and objective and is it aligned to the company’s needs?
• It is important to focus on not just earnings but on the sustainability of business models. Focus on not just “How much?”
but on “How?”, “At what cost?” and “At whose expense?”
• Rating agencies need to develop criteria that focus on substance rather than the form of governance
• Compensation of executive directors should flow from an objective performance evalution process conducted by the board
• Greater transparency and disclosure of executive performance criteria are required which should include financial and
non-financial measures
• Regulators should send clear signals that they shall be proactive in imposing substantial penalties for non-compliance, so
that compliance is strictly adhered to.
ROLE  of Comptroller & Auditor General :
- To enhance accountability of the executive to the Parliament and State Legislatures by carrying out audits in the public sector and providing accounting services in the states in accordance with the Constitution of India and Laws as well as best international...

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