Corporate Excellence through

Corporate Governance

Corporate Excellence through

Corporate Governance

Corporate Governance rests with the Vision and Perception of the Leadership

and

A Leader need to adopt a Vision for Corporate Governance

The Institute of Company Secretaries of India

”Corporate Governance is the

application of bestmanagement

practices,compliance of law in letterand spirit and adherence to ethical standards

for effective management and distribution of wealth

and discharge of social responsibilityfor sustainable

development of all stakeholders”

Corporate Governance

"Corporate governance is the system by which business corporations are directed and

controlled.

The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers,

shareholders and other stakeholders,

and spells out the rules and procedures for making decisions on corporate affairs.”

"Corporate governance is the system by which business corporations are directed and

controlled.

The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers,

shareholders and other stakeholders,

and spells out the rules and procedures for making decisions on corporate affairs.”

Corporate Governance FrameworkCorporate Governance Framework

Output – Input = Wealth Created ?

Sustainability

Happiness andProsperity of all

Stakeholders

Reinvestment

Distribu- tion

Research and DevelopmentHR DevelopmentInfrastructureRisk Management

SUPPLIERS Adequate Returns

HUMAN ASSETS Adequate Remuneration

CUSTOMERS Affordable Prices

PUBLIC Payment of Taxes and Partnership in National Development Projects

Wealth Creation Wealth Management Wealth Sharing

EnhancedCapabilities

Best Management Practices are Vital Here Law and Ethics are Vital Here

Stakeholders in Value ChainStakeholders in Value Chain

SUPPLIERS CUSTOMERSHUMAN RESOURCE

Supply Funds, Materials and Services

Value Addition and Management of Resources

Give Opportunity to Co. to Satisfy their Needs

Adequate Returns for Funds, Material and Services Supplied

Adequate Salary and Security for leading a Happy Life

Best Quality Products and Customer Care at Minimum Prices

ROLE OF STAKEHOLDERS

EXPECTATIONS OF STAKEHOLDERS

Potential Suppliers, Human Resources and Customers

Biological, Economic and Cultural EnvironmentPUBLIC

PUBLIC EXPECTS PARTNERHIP FOR SUSTAINABLE DEVELOPMENT

Principles of Corporate ExcellencePrinciples of Corporate Excellence

Fairness to all stakeholders

Mutual Trust, Transparency and Togetherness

Unrestricted Communication and Continuous Feedback

Sharing Knowledge, Success Stories and Experience

Sharing Happiness and Concerns

Helping Each Other – Round the Clock

Infact, these principles are the foundation of

Best Governed Organisations

irrespective of their form and size

7 Deadly Sins

7 Deadly Sins Avoid

Wealth without Work Pleasure without ConscienceKnowledge without CharacterScience without HumanityReligion without SacrificePolitics without Principle COMMERCE (BUSINESS) WITHOUT MORALITY

(ETHICS)

THE GLOBAL AGENDA 2010 The Issues

THE GLOBAL AGENDA 2010 The Issues

Rethink 20th century Institutions – redesign them to meet 21st century demands

Need to adapt new models of cooperation – to reconsider ‘one-size-fits-all’ model

New matrix needed to integrate social goals and values.

Need to protect rights of people – to minimize global systematic risks

11

Advantages of applying Best Corporate Governance Practices

Growth

Growing Revenues

Growing Profits

Growing Market Value

Widespread Goodwill and Brand Reputation

Access to Global Markets

Better Access to Human Capital

Ready Market for New Products

Widening Customer Base

Enhanced Trust and Confidence of all

Stakeholders

EMPLOYEESEMPLOYEES

INVESTORSINVESTORS CUSTOMERSCUSTOMERS

SUPPLIERSSUPPLIERS

GOVERNMENT AND REGULATORS

GOVERNMENT AND REGULATORS

SOCIETYSOCIETY

Leading to…

Environment

Civil SocietyBusiness Society

SUSTAINABLEDEVELOPMENT

Commitment to well-being and progress of all stakeholders is our age old mantra

Satyam Vada Dharmam Chara

- Taittariya Upanishad

“Forever speak the truth and follow the

dharma”

Truth : Disclosure of Actual State of Affairs

(Transparency in operations and transactions)

Dharma : “Dharma is for the stability of

society, the maintenance of social order and the general well-being and progress of humankind.”

- Karna Parva of the Mahabharata. Verse-58 in Chapter 69

Corporates should act like honeybee which suck the nectar of the flowers without effecting

its fragrance and produce honey for the well –being of

society .

Corporate Social Responsibility is not philanthropy. It is not charity. It is an investment in our collective future

- Dr. Manmohan Singh

Governance Concept in ‘Ramayana’Governance Concept in ‘Ramayana’

To provide “the maximum happiness for the

maximum number of people for the maximum

period, based on the principles of Dharma –

righteousness and moral values.”

- Ayodhya Kand

“The Customer is King”

- Mahatma Gandhi

This is the soul behind modern

Marketing Management

Worshipping 33 Crore Godheadssignifying various species, plants,

cosmic elements, …

Care for Panchtatvas - Prithvi, Jal, Vaayu, Akaash and Agni that make a human

being

This is our approach to

Environment Protection

The four essential principles of Mahatma Gandhi's philosophy

Truth, Ahimsa, Trusteeship and Constructive Action

Corporates are also expected to use their

Capacity, Knowledge and Resources

Maximisation of stakeholders’ value and well-being and progress of humankind

TOWARDS

THROUGH

Transparency, accountability and truthful disclosure of state of affairs

Dharma

Truth

This is our own age old mantra of

Good Governance

Outstanding Performance,

Higher Profits,

Expanded Market Reach and the like

FAILS

to protect a company

which has put good governance & ethics

at the back burner….

History is Witness

S

U

C

E

S

S

D

I

S

A

S

T

E

R

Common Factors behind such eventsCommon Factors behind such events

35

Emerging IssuesEmerging Issues

36

..…Only the culture of

strict adherence to good compliance

can keep a company

ahead on sustainable basis , bring in larger

profits…

Secret behind building foundationsSecret behind building foundations

Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…

A Comparison within companies in FMCG Industry with their P/E multiple

41.39

37.36

36.70

31.93

28.79

Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…

A Comparison within companies in Pharma Industry with their P/E multiple

19.37

14.81

14.7

5.35

Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…

A Comparison within companies in Banking Industry with their P/E multiple

6.13 6.25.97

4.81

Corporate Governance and Valuation Effect… Few Examples…Corporate Governance and Valuation Effect… Few Examples…

A Comparison within companies in IT Industry with their P/E multiple

Companies with better governance is presumed to have a better face and thus greater P/E Multiple and Enhanced Valuations...

Source: Economic Times, dated 1st July, 2010

19.79

19.58

15.85

7.43

9.78

Companies that have followed theseprinciples of

Corporate Governancehave

Consistently earned high returns, increased their net worth and

enhanced their shareholders wealth

Invested significantly in proactive research and development

Developed people into ‘achievers’ than just ‘performers’

Dealt ethically with customers, government and business partners

Maintained and updated their professional management culture, system and processes

..and accomplished

WINNINGEMPLOYEES

WINNINGEMPLOYEES

GROWINGINVESTORS

GROWINGINVESTORS

DELIGHTEDCUSTOMERS

DELIGHTEDCUSTOMERS

TRUSTEDSUPPLIERS

TRUSTEDSUPPLIERS

SATISFIEDGOVERNMENT AND

REGULATORS

SATISFIEDGOVERNMENT AND

REGULATORS

HAPPYSOCIETY

HAPPYSOCIETY

Excellence in Corporate Governance

Corporate Excellence

Social Excellence

National Excellence

Excellence in Corporate Governance leads to National Excellence

Thus, Although a lot has been done, but a lot needs to be done.

Pavan Kumar Vijay Managing Director

Corporate Professionals India Pvt. Ltd.D – 28, South Ext- I,New Delhi 1100049

Tel: +91.11.40622200,Fax: +91.11.40622201

Email: info@indiacp.com

Visit us at:www.corporateprofessionals.com