Principles of corporate governance have become conventional wisdom with the realisation
that it is a necessary tool for the economic health of a company and more importantly,
for society at large. Implementation of governance practices, however, continue
to vary between companies, nations and across regions. The driving force for an
increasing number of companies today is adopting voluntary initiatives that improve
relationships with all constituents – customers, shareholders and all other stakeholders.
But beyond a company’s direct web of relationships, the ‘corporate conscience’ has
now taken centre stage wherein companies are differentiated on the basis of working
conditions, environmental strategies and their response to community needs.
Governance norms have assumed greater significance in India with corporates having
scaled up in size and ambition as they seek to establish a global footprint. Investors
willingly attach a premium to well-governed companies. The upside of good governance
is access to lower cost resources as well as better valuations. The Indian regulatory
framework has ensured that the interests of stakeholders are well protected, though
ultimately, the prime responsibility of good governance lies within an organisation
and not outside it.
An effective corporate governance framework needs to be flexible to respond to changing
market dynamics, yet it must be unwavering as regards its values and ethics. While
designing and implementing governance processes, there is a need to ensure an effective
mechanism of checks and balances with transparency and accountability as the hallmark.