VALUE ADDITION TO ENTERPISE THROUGHCORPORATE GOVERNANCE

Pavan Kumar Vijay

Managing Director

04/18/2023

What is Corporate Governance???

Corporate Governance rests with the Vision and Perception of the Leadership

and

A Leader need to adopt a

Vision for Corporate Governance

Corporate Governance Framework

Output – Input = Wealth Created ?

Sustainability

Happiness andProsperity of all

Stakeholders

Reinvestment

Distribu- tion

Research and Development HR Development Infrastructure Risk 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

Principles 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

Fairness to all stakeholders

Mutual Trust, Transparency and Togetherness

Unrestricted Communication and Continuous Feedback

Sharing Knowledge, Success Stories and Experience

Infact, these principles are the foundation of

Best Governed Organizations'

irrespective of their form and size

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 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

Companies that have followed these

principles of

Corporate Governance

have

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

“ Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.”

- The Institute of Companies Secretaries of India-

Value Addition to Enterprise through Corporate Governance

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

Corporate Value without Corporate Governance – The Past

COMPANY

• Loss of reputation in International Market

• Loss of Moral Fibre of Corporataions.

Corporate Value without Corporate Governance – The Past

STAKEHOLDERS

• Auditors - Independence compromised to

obtain lucrative consulting assignments

• Employees - Large disparity between the

highest and lowest paid employee

• Analysts - Ever-greening of Corporate & Stock

reports.

Corporate Value without Corporate Governance – The Past

STOCKHOLDERS:

• Loss of Investors Confidence.

• Difficulty in further raising of capital.

• Investor Complaints

Corporate Value without Corporate Governance – The Past

PRACTICES:

• Aggressive accounting practices.

• Incompetence of board members and

overriding of audit committees .

• Dividend linked to short-term revenue

growth, EPS and stock price.

Upshots in Legal Framework

Clause 49 of Listing Agreement.

Section 192A, 292A etc. in the Companies

Act

Legal Norms of CG

Concept of Independent Directors & Audit

Committees

Stricter independence standards for Audit

Committees

Board Professionalism

Whistle Blower Policy

Certifications and disclosures

Real time disclosure & Shortened deadlines

ARE SHAREHOLDERS THE ONLY STAKEHOLDERS ?

Corporate Governance Value Chain

Investors Lenders Customers Suppliers Employee

sGovernmen

t Regulator

“Corporate Governance is not related to investors only, though they are most

important Beneficiary.”

Stakeholders 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

Stakeholders’ Stake in Corporate Governance Value Chain

Lenders 2/3rd Investment

Investors 1/3rd Investment

Customers 100% Earnings

Suppliers ½ of Working Capital

Employees 100% Value Generation

Government Basic Infrastructure & Facilities

Regulator Dispute Resolution

2 : 1 Debt –

Equity Ratio

2 : 1 Current Ratio

What CG Brings…

People

PurposePerformance

Process

Value Addition through CG

CORPORATE GOVERNANCE

INVESTORS LENDERS CUSTOMER EMPLOYEESUPPLIER

• Confidence

• Security of Funds

• Safety of interest & principal.

• Better & Favorable Credit Terms

• Value Creation

• Better quality of Products/ Services

• Cheaper prices

• Value Creation

• Favorable terms of supplier agreements

• Better quality of HR

• Better Salary

• Benefits

• Stability

Govt./Regulator

• Tax• Complian

ce• Employm

ent• Social

Commitment

Measurement of Value Addition

•Return on Capital Employed

•EPS / DPS

•Dividend Pay-out Ratio

Investors

•Debt-Equity Ratio

•Debt Coverage Ratio

•Interest Coverage Ratio

Lenders

•Market Share

•Stock Turnover Ratio

Customers

•Credit Period

•Credit Rate

Suppliers

•Employee Turnover Ratio

Employees

•Subsidies

•Basic Infrastructure Amenities

Government

•No hasty Actions

Regulators

Benefits As To Corporate Governance

Investors

Lenders

Customers

Suppliers

Employees

Government

Regulators

• Increase in Goodwill• Increase in Investment

• Better credit terms• Fund security

• Better quality goods• increase in Goodwill

• More credit• Increase in

creditworthiness• Reduction in Employee

Turnover

• Relaxation of norms

• Increase in Goodwill• Relaxation of Norms

Corporate Governance Enhances Brand Value

Quality in Board Structure

Better Board Management and Practices

Contribution of Independent Directors

Successful Strategies

Adequacy of Controls

Independence of Auditors

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

..…Only the culture of strict adherence to good

compliance can keep a company

ahead on sustainable basis , bring in larger profits…

Secret behind building foundations

Present Status of CG Practices – The CRISIL Experience

Practice Status

Equitable Treatment of

Shareholders

Moderate

Transparency and Disclosure

Relatively

strong

Composition of Board Scope for improvement

Functioning of Board Moderate

Value Addition - The CRISIL Experience

Stakeholders Status

Share Holders High

Debt Holders Highest

Employees Moderate

Customers High

Suppliers Scope for improvement

Society Scope for improvement

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

CORPORATES SHOULD ACT LIKE HONEY BEE WHICH SUCK THE NECTAR OF THE FLOWER WITHOUT EFFECTING THE FRAGRANCE AND PRODUCE HONEY FOR THE WELL-BEING OF SOCIETY.

THANK YOU