tag:blogger.com,1999:blog-41229924856114660082024-02-08T12:26:12.475-08:00Asish's BlogCorporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.comBlogger88125tag:blogger.com,1999:blog-4122992485611466008.post-76834109346535602112020-04-29T21:37:00.003-07:002020-04-30T17:44:54.059-07:00Analytical and Problem-Solving Skills are Important but Recruiters’ Focus on Leadership-Skills for Recruiting First-Level Executives<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">Analytical and Problem-Solving Skills are Important but Recruiters’ Focus on Leadership-Skills for Recruiting First-Level Executives<o:p></o:p></span></h1>
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<span lang="EN-US">Asish K Bhattacharyya<o:p></o:p></span></div>
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<i><span lang="EN-US">Reading time: 10 minutes<o:p></o:p></span></i></div>
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<span lang="EN-US">Although Peter Drucker, who is considered to be the first Management Guru and who is still the widely read author in management, argued in 1954 that that management subsumes leadership. In 1970s, a debate on whether management skills are different from leadership skills surfaced in management literature. The debate has lost relevance. Now recruiters are looking for leadership skills while recruiting first-level executives. <o:p></o:p></span></div>
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<span lang="EN-US">Peter Drucker in his book, The Practice of Management (published in 1954), describes the jobs of the management. According to him, management has three jobs – managing a business, managing managers and managing workers and work. Although those three jobs can be discussed separately, they are integrated, and managers cannot separate them in discharging their responsibilities on daily basis. According to Drucker, managing business means ‘managing by objectives’, because managers’ performance is measured against objectives they set for themselves or set by others. Management is a practice – it is a blend of science and art. Manager has to act and perform by applying her knowledge and skills to achieve the desired results. ‘Manage managers’ implies making human and material resources productive to achieve the objectives. ‘Managing worker and work’ implies that manager has to ensure that workers perform at their full potential and make material resources productive. The term worker covers a whole range of employees - unskilled to CEO. To quote Drucker, “It implies consideration of the human being as a resource – that is, as something having peculiar psychological properties, abilities and limitations that require the same amount of engineering attention as the properties of any other resource, e.g., copper. It implies also consideration of the human resource as human beings having, unlike any other resource, personality, citizenship, and thus requiring motivation, participation, satisfaction, incentives and rewards, leadership, status and function.” <o:p></o:p></span></div>
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<span lang="EN-US">Drucker says that the management must consider both present and the long-term future. He says, “management – almost alone-has to live always in both present and future”. He further says, “management must keep the enterprise successful and profitable in the present – or else there will be no enterprise left to enjoy the future. It must simultaneously make the enterprise capable of growing and prospering, or at least surviving in the future – otherwise it has fallen down on its responsibility of keeping resources productive and unimpaired, has destroyed capital”.<o:p></o:p></span></div>
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<span lang="EN-US">Managers allocate the total time and attention span available to them to the three separate but integrated jobs depending on their job profile and position that they occupy in the organisation hierarchy. <o:p></o:p></span></div>
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<span lang="EN-US">John B Kotter in an article entitled, “What leaders really do’ published in Harvard Business Review (first published in 1990 and reprinted in HBR December 2001) explains the difference between leadership and management. According to Kotter, the following are the differences:<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; mso-ansi-language: EN-US; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US">Management is about coping with complexity. It brings a degree of order and consistency in key dimensions of a large business. Leadership is about coping with change. In a dynamic business environment business firms survive and grow by managing changes in the internal and external contexts and not merely by managing complexity. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; mso-ansi-language: EN-US; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US">Both managing complexity and managing change requires three activities - deciding actions required, creating networks of people and relationships in order to accomplish the agenda and ensuring that those people actually effectively and efficiently perform tasks assigned to them. However, leadership require accomplishing those three activities differently from the way management accomplishes them.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; mso-ansi-language: EN-US; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US">Managing complexity requires planning and control, including allocation of resources, for a short period, say for one year. Managing change requires developing a vision for distant future and formulating strategy for achieving the same. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; mso-ansi-language: EN-US; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US">Implementing the plan requires creating the right organisation structure, designing job profiles, assigning jobs to right individuals, communicating plans to those individuals, delegating powers to them and monitoring their performance. Planning and control also require monitoring overall implementation of the plan and taking corrective actions based on feedback. Achieving vision requires aligning people, that is, creating coalition of individuals who understand the vision and committed to achieving the same. <o:p></o:p></span></div>
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<span lang="EN-US">HBR reprinted the article in 2001, because even at that time most companies in U.S.A. lacked focus on the leadership component of management. They focused too much on planning (including long-term planning, also called corporate planning, say for five years), analysis and solving problems, and control. They recruited candidates at executive positions who demonstrated analytical and problem-solving skills. However, companies were finding that those two skills were inadequate to cope with rapid changes in the external contexts. When searched for managers for leadership skills for senior management positions, they found it difficult to find right individuals, as most companies rewarded managers with analytical and problem-solving skills. Organisation culture was such that they produced leaders with high IQ, but low leadership skills. <o:p></o:p></span></div>
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<span lang="EN-US">Managers at every level should have leadership skills and an organisation culture should be created to encourage executive to acquire those leadership skills (rather, discover those skills within) and reward executives having leadership skills.<o:p></o:p></span></div>
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<span lang="EN-US">Things have changed since then. Even in India companies are recruiting individuals with high leadership skills in entry-level executive positions and giving higher responsibilities to only those who demonstrate application of those skills.<o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-43709196396548900192020-04-26T17:44:00.001-07:002020-04-26T17:44:35.985-07:00<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">CORPORATE GOVERNANCE - CEO DUALITY</span></div>
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<span lang="EN-US">The Security and Exchange Board of India (SEBI) has deferred the date by which the top 500 listed companies are required to comply with regulation to separate the roles of the chairperson and the CEO from April 1, 2020 to April 1, 2022. The SEBI regulation requires that the non-executive chairperson and the CEO should not be related to each other as per the definition of relative in the Companies Act 2013. It is explained that SEBI has taken the decision to defer the applicability of the regulation in view of the demand from companies and to keep the compliance burden low in the wake of current economic scenario. <o:p></o:p></span></div>
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<span lang="EN-US">When we see through the lens of agency theory, which assumes that the manager ignores the interest of the company and enriches itself unless monitored, separation of the two roles - chairperson and CEO makes sense, albeit theoretically. Independent chairperson improves the oversight function of the board. The chairperson has clear authority to speak on behalf of the company and to manage the board meetings. Separation mitigates the conflict of interest in the areas of performance evaluation, executive compensation, succession planning, and appointment of new directors. It allows the CEO to focus on strategy implementation and organisational issues, as the responsibilities related to management oversight, board leadership and governance-related matters lie with the chairperson. Crafting strategy is the joint responsibility of the board and the CEO. <o:p></o:p></span></div>
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<span lang="EN-US">When we see through the lens of the stewardship theory, which assumes that the manager is motivated to work in the interest of the company, separation of the two positions does not make sense. A manger, who is self-motivated to work in the interest of the company, does not required monitoring. On the other hand, separation of the two roles results in losing the benefits of ‘unity of command’.<o:p></o:p></span></div>
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<span lang="EN-US">The U.K. Code of Corporate governance, which is a soft law (comply or explain) mandates that the same individual should not occupy both the positions. In U.S.A. there is no mandate to separate the roles of the chairperson and the CEO. However, more and more companies in U.S.A. are now separating the two roles. In 2005, in 30 per cent of the S&P 500 companies the role of chairperson and the CEO were split. In 2013, the percentage increased to 40 per cent and now it is 53 per cent. OECD Corporate Governance Fact Bok 2019 reports that out of 37 jurisdictions covered in the report, 30 per cent require separation, 30 percent do not require separation, 35 per cent recommend separation and 5 percent have incentive mechanism to induce separation. <o:p></o:p></span></div>
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<span lang="EN-US">Research fails to provide conclusive evidence that the separation of the two roles improves performance. Research evidence suggests that benefits and drawback of separation of the two roles are situation dependent and depend on array of factors. Two professors of Stanford University examined the leadership structure and the circumstances under which they changed over a twenty-year period (1996-2015). Their sample consisted of 100 largest and 100 smallest of Fortune 1,000 companies (2016). They reported that most separations (78 per cent) occur during orderly succession when the former founder, CEO or other officer continuing to serve as chairperson temporarily or permanently. Research evidence suggest that the temporary separation provides stability. The vast majority of cases of combining the two positions (91 per cent) involve an orderly succession at the top. In a nutshell, changes in the leadership involved orderly succession. In some cases, companies separated the two positions to address corporate governance failures under shareholders’ pressure. <o:p></o:p></span></div>
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<span lang="EN-US">Indian family businesses dominate the corporate sector and will continue to drive the growth of the economy. Stewardship theory better explains the behaviour of the controlling shareholder (the family). Mandating family businesses to separate the chairperson and CEO positions is like forcing someone to take medicine without an ailment, ignoring the ill effect of the same. One complaint against family businesses is that the family expropriates the wealth of non-controlling shareholders through abusive related party transactions (RPT) etc. This has already been addressed under the current dispensation by making the audit committee responsible to approve RPTs. Appointment of a lead independent director might be a better option than mandating separation of the positions of the chairperson and CEO. If, companies are forced to separate the two positions, they will prefer to appoint the nominee of the controlling shareholder as the non-executive chairperson and an outsider as CEO, who will be subservient to the chairperson in the interest of the company and in his/her self-interest. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-48666360372087998632017-10-11T22:38:00.000-07:002017-10-11T22:38:21.408-07:00True and fair view<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
Ensuring that financial statements give a faithful account
of the economic performance and well-being of a firm lies at the foundation of
corporate financial reporting. Indeed, the nineteenth century British law which
first allowed companies to be incorporated through registration rather than
through royal charters or acts of parliament—the Joint<i> </i>Stock Companies
Registration and Regulation Act<i> </i>of 1844—also required these companies to
prepare a ‘full and fair’ balance sheet. Another founding legislation, the UK
Companies Act of 1900, required auditors to report whether the balance sheet
exhibits a ‘<!--[if supportFields]><span style='mso-element:field-begin'></span>xe
"true and correct"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->true and correct’ view of the
state of the company’s affairs. Today’s regulatory practices continue to aim at
the same goal of ensuring transparency and unbiasedness in accounting.<o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>However,
regulators face a dilemma. Ensuring faithfulness requires the framing of rules
and guidelines for accounting. Yet, a rule which is too strict may fail to
capture the essence of an economic situation when applied in settings not
foreseen by the framers of the rule. Moreover, as business becomes more
complex, unscrupulous entities can actually exploit such narrow rules to fulfil
the letter of the law while defying its spirit.<o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>An early
statement of this dilemma can be found in the <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "Institute of Chartered
Accountants of England and"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]--><!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "Institute of Chartered
Accountants of England and"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->Institute of Chartered
Accountants of England and Wales’ demand for an amendment in the “true and
correct” requirement of the Act of 1900. They said, “The word ‘correct’ has
always been too strong because it implies that there is one view which is
‘correct’ as against all others which are incorrect. In published accounts
there is no standard of absolute truth and the Institute’s suggested amendment
would recognise that the presentation of figures can only be that which a fair
view is, in the personal view of the auditor,” (<i>The Accountant</i>, 1 July
1944, p. 2). Following this, the term ‘true and fair view’ was introduced in
British legislation through the Companies Act, 1948.<o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>The Indian
Companies Act too imposes a general requirement that financial statements give
a true and fair view of the state of affairs of the company and its
performance. Schedule III of the Act provides the format for the presentation
of balance sheet and stipulates principles for the preparation of balance sheet
and profit and loss account. But adherence to the disclosure requirements is
subservient to the overriding requirement of “true and fair”, and departures
from schedule III are allowed if that is necessary in order to give a true and
fair view. <o:p></o:p></div>
<div class="MsoNormal">
<b><span style="mso-tab-count: 1;"> </span>True and
fair view</b> expresses a broad philosophy which cannot be restricted by a
specific legal definition. Rather, the need is to understand the spirit
underlying the concept. The general understanding is that “true and fair”
implies that financial statements should not only be made out correctly, but
they should convey an overall fair view and should not give any misleading
impression. There should be transparency in reporting the financial position
and working results. <o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>But in
practice, accountants take a narrow view of the concept of <i>true and fair</i>.
According to them, financial statements give a ‘true and fair’ view if, they
are free from any material error or bias, and that they are prepared and
presented in accordance with legal requirements and by applying the accounting
principles and methods stipulated in various <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "accounting standards"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->accounting standards. Auditors
do not take into account whether any disclosure beyond the minimum required by
law and accounting standards is required for financial statements to give a
true and fair view and whether voluntary disclosures are adequate. Moreover,
accountants and auditors are reluctant to deviate from the principles and
methods set out in accounting standards even if there are strong indications
that application of accounting principles other than those stipulated in
accounting standards will improve the presentation of financial statements. <o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>The
Companies Act too requires that every profit and loss account and balance sheet
shall comply with the accounting standards and any deviation from the
accounting standards should be disclosed along with the reasons for deviation.
It does not make it clear, as in the case of Schedule III, that true and fair
overrides the requirements of accounting standards. Courts usually take the
view that financial statements drawn up in accordance with legal requirements
and <!--[if supportFields]><span style='mso-element:field-begin'></span>xe
"generally accepted accounting principles (GAAP)"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->generally accepted accounting
principles (GAAP) present the true and fair view. Thus, for the legal systems
accountants and auditors, true and fair view has become subservient to
accounting standards. <o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>In 1988, a
strong dissent was made against this by Sir David Tweedie, the past Chairman of
the <!--[if supportFields]><span style='mso-element:field-begin'></span>xe
"International Accounting Standards Board"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->International Accounting
Standards Board (IASB), when he was the Chairman of the Accounting Standard
Board (ASB) of UK. He stated, “In its progressive form it (true and fair view)
can be used to replace antiquated laws and indeed outdated accounting standards
prior to their revision.” Regulators might not agree with this progressive
interpretation. Allowing companies to apply the true and fair view concept
without any bound, such as the one being imposed by <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "accounting standards"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->accounting standards, provides
huge opportunities for <!--[if supportFields]><span style='mso-element:field-begin'></span>xe
"creative accounting"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->creative accounting.
Therefore, it is unlikely that the true and fair view will override accounting
standards.<o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>This leads
to a more fundamental question. What should be the bounds or limits that should
be imposed by accounting standards? At one extreme, we may live with only the <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "conceptual framework"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->conceptual framework which
sets out the fundamental accounting principles relevant and appropriate in the
present-day context and replaces the bunch of <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "accounting conventions"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]--><i>accounting conventions</i>.
At the other extreme, regulators may issue <i>rules-based accounting standards</i>.
In between the two extremes lies <i>principles-based accounting standards</i>.
The moot question is how much flexibility should be provided to accountants and
auditors in deciding the accounting policy. Too much flexibility is as bad as
too little flexibility. In this, principles-based accounting standards strike
the right balance. <o:p></o:p></div>
<div class="MsoNormal">
<span style="mso-tab-count: 1;"> </span>There is a
need to change the perception that a standard that permits fewer allowable
alternative accounting methods is superior to one that permits more alternatives.
If we accept the paradigm that accountants and auditors should be provided
adequate flexibility to formulate accounting policy, taking into consideration
specificity of transactions and the nature of industry, an accounting standard
that permits adequate number of alternatives should be considered superior to
the one that provides no alternative. Ideally, an accounting standard should
clearly articulate the objectives of the standard and stipulate accounting
principles without detailing the rules. Examples may be given to explain the
principles. This will provide enough flexibility to accountants and auditors to
apply the concept of true and fair view and formulate appropriate accounting
policy based on stipulated accounting principles. Accounting bodies should
refrain from issuing large number of interpretations and opinions. For example,
the <!--[if supportFields]><span style='mso-element:field-begin'></span>xe
"Institute of Chartered"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->Institute of Chartered <!--[if supportFields]><span
style='mso-element:field-begin'></span>xe "Accountants of India"<![endif]--><!--[if supportFields]><span
style='mso-element:field-end'></span><![endif]-->Accountants of India (ICAI)
should stop providing expert opinion on accounting for transactions specific to
a particular company. Although much lower in hierarchy than accounting
standards and other technical pronouncements, they become a part of the rule
book and a reference point for accountants and auditors and reduce the desired
flexibility in formulating company-specific accounting policy. <o:p></o:p></div>
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<span style="mso-tab-count: 1;"> </span>The
proposed approach will reduce the work of standard setters and they will find
it difficult to justify their present organisational structure. But that should
not be a consideration in reforming the format of accounting standards. <o:p></o:p></div>
</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-9084646491932390182017-10-11T21:30:00.000-07:002017-10-11T21:30:31.007-07:00Kotak Committee Report on corporate governance was not needed - my interview in ET CFO<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: What are your broad views on the Uday Kotak-led panel report on corporate governance?</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: Although the panel has made many important recommendations, which are conceptually sound, I think, this report wasn't needed in the first place. We came upwith the <span style="color: #00bee6;">Companies Act </span>in 2013, and then <span style="color: #00bee6;">Sebi </span>Listing Obligations and Disclosure Requirements (<span style="color: #00bee6;">LODR</span>)Regulations in 2015. And it has been just two years since then that we came again with the new recommendations. The question that arises is that are we really going to bring new regulations so frequently to improve corporate</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
governance?</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
I believe present laws are enough to improve corporate governance. We should let them stabilise first, and try to make companies apply them in spirit. For this, a change in mind set is extremely important. In absence of that, companies will continue to adopt the 'tick box' approach to corporate governance.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: On the Board structure the Kotak Committee recommends a minimum of 6 directors for listed companies? How do you look at this suggestion?</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: Usually the average size of the Board in India is between 8-9 directors and therefore for large companies this is not at all an issue. But for smaller companies (bottom 2000 companies) this might be a problem. Their compliance cost will increase.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: What do you make of minimum Rs 5 lakh annual remuneration and Rs 20,000-50,000 sitting fees for</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
independent directors?</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: The panel has recommended minimum compensation for top 500 companies. The minimum</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
remuneration for independent directors is not required. Independent directors, who are accomplished individuals in their own field, are not driven by monetary incentives.The risk is that those who are not accomplished will compromise on independence. I believe, as is the case at present, the board should decide the sitting fees and the commission.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: The panel also recommends at least one independent woman director and talks about splitting</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
the MD/Chairman posts...</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: My observation is that the report on board structure and other things are really not important. Because provisions in the Companies Act and Sebi's LODR are enough for improving corporate governance. The panel has recommended that at least one womandirector should be independent, but why? There can be one logic that is if the woman director is related to the promoter, she might carry the opinion of the promoter, and not share her independent views instead. Therefore thebenefit of gender diversity may not come. But we are stretching our assumptions. These are general beliefs. There is no research to say that an independent women director is contributing more than non- executive women</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
director or executive women director. This doesn't serve much purpose in terms of merits. If the culture in the Board is to allow free discussion and a virtuous cycle is created that is there is mutual trust</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
between the <span style="color: #00bee6;">Board of Directors</span>, then even the executivewoman director will be able to bring her point of view. It all depends on the company's culture and the Board culture. Second, you are again compelling the bottom 2000 companies to appoint someone as woman independentdirector on their Boards when there is already a scarcity of independent directors with right credentials.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Likewise the panel has talked about dividing the position of Chairman and MD but they have not said independent director should be the chairman, they have said nonexecutive director should be the chairman. Now, in the Nifty 50 companies, over 30-35 are run by family businesses and most of them have non-executive chairman, who is either promoter or related to the promoter. In those companies, the CEO and the chairperson positions are separated. But is the CEO independent of the non-executive chairman, the answer is no. Again the control is tilted towards the executive management. The panel has recommended that if the chairman is not an independent director, lead independent director should be appointed. This concept is good. But, the effectiveness depends on the 'independence of the independent director'. Today, in most companies, NRC (Nomination and</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Remuneration Committee) is not effective. No independent director is appointed without the tacit approval of the controlling or dominant shareholder. This is unlikely to change unless the mind set of such a</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
shareholder changes, even if majority of the members of NRC are independent directors, as recommended by the panel.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: The panel has emphasized a great deal especially on the role of Independent Directors.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: I believe that independent directors in family run businesses can't improve Board's effectiveness in</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
oversight function. They improve Board's effectiveness in advisory function. They can check and protect minority shareholders from direct fraud. But they do not engage effectively with management in deciding the strategy and other important issues. It is the promoter who invests most of the family wealth in the company and brings funds in crisis situations by providing personal guarantee. Such a promoter would find it difficult to effectively engage independent directors in decision-making, unless he or she sees value in the same. Hence, a change in mind set is more crucial in improving the effectiveness of boards and independent directors.</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
Q: The panel also talks about the number of times the Board should meet in a year. How important is this?</div>
<div style="color: #424242; font-family: Helvetica; font-size: 13.5px; font-stretch: normal; line-height: normal;">
AKB: The panel recommends that the Board should meet at least five times in a year. At present, the requirement is four times in a year. Usually, in large companies the Board meets more than four times in a year depending on the issues before it. For small companies, increase in the number of meetings will increase the compliance cost. I think that the current requirement is adequate.</div>
<div style="color: #797979; font-family: Helvetica; font-size: 11px; font-stretch: normal; line-height: normal;">
<br /></div>
</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-75436581631116245782017-08-16T09:23:00.001-07:002017-08-16T09:23:18.255-07:00Anil Kumble's resignation - A governance issue<div dir="ltr" style="text-align: left;" trbidi="on">
<div align="right" class="MsoNormal" style="text-align: right;">
<span style="text-align: left;"><br /></span></div>
<div class="MsoNormal" style="text-align: left;">
<span style="text-align: left;">Anil Kumble resigned from the position of
Head Coach of the Indian (senior men’s) cricket team in June 2017, because
Virat Kohli, the captain of the Indian team and some team members did not like
his style of working and the relationship between the captain and the coach
became ‘untenable’. It is not for the
first time that the head coach of the Indian team had to leave the job for
differences with the captain. </span></div>
<div class="MsoNormal">
<span lang="EN-US">The head coach’s responsibilities include developing
the overall coaching plan and monitoring the performance of the coaching staff,
finalising the playing eleven and formulating strategy in consultation with the
captain before a game and ensuring that fringe payers are ready to take the
field when required. The head coach should be able to take a position and
advise the captain if he is wrong. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">If, we go by the writing of cricket
journalists, the head coach of the Indian cricket team survives only if he
gives freehand to the captain in selecting the playing eleven and formulating
strategy, and goes soft with the captain and star players. In Indian cricket,
head coach is placed a rung below the captain. Some argue that it should be so,
because cricket is a ‘team game’ and the team belongs to the captain, who leads
the team in the field and formulates strategy under pressure during the game.
However, others differ.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The relationship between the captain and
the head coach is similar to the relationship between the board of directors
(hereafter board) and the CEO.<span style="mso-spacerun: yes;"> </span>In
cricket, the goals of both the captain and the head coach is the same, which
are to win matches and to build a team that will continue to win matches. Similarly,
the goal of the board and the CEO is the same, which are to achieve vision and
mission of the company and to continuously create shareholder value, while
being compliant to applicable laws and social norms. As in cricket, the
relationship between the CEO and the board comes under stress when the board
engages with the CEO in the management of the company. Often, the CEO perceives
it as intrusion in his/her territory and interference. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The key question is what should be the level
of the engagement of the board in the management. It is determined by the
environment, in which the company operates, and board’s power and knowledge. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">In cricket the engagement of the head coach
in the management of the team is likely to be high for a team, which plays
large number of matches every year in different locations, like the Indian
cricket team, because players suffer injury and sometimes star players are to
be counseled to sit out based on the ground condition or his fitness or form.
Similarly, board’s engagement in the management should be high in a company
that is operating in VUCA (volatile, uncertain, complex and ambiguous)
environment or is going through a crisis. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The board gets the power from the laws and
regulations, and the articles of association. In Indian cricket, the head coach
lacks power because the Board of Control For Cricket in India (BCCI), in
practice, has placed the coach one rung lower than the captain. The situation is
reverse when it comes to knowledge. The head coach has an expert knowledge of
the game. Unfortunately, most boards lack adequate knowledge.<span style="mso-spacerun: yes;"> </span>Exemplary boards ensure that the board has
adequate knowledge by selecting right individuals as directors and through
training. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">If the coach fails to engage in team
management, ultimately the team suffers. Similarly, if the board shies away
from engaging in management when required, ultimately the company suffers. An
exemplary board supports CEO, but also intervenes, when required and before it
is too late. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The relationship between the board and the
CEO should be that of trust. Exemplary boards develop corporate governance
policy, in consultation with the CEO, in order to maintain healthy relationship
between the CEO and the board. It is usually in writing. It clearly articulates
areas that are reserved for the CEO and those that are reserved for the board
and the expected level of engagement of the board in management. For example,
it may articulate in detail the board’s involvement in crafting, implementing
and reviewing strategy. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">It will be good for the Indian cricket if
BCCI develops a document like corporate governance policy and place the coach a
rung higher than the captain, as it is in other sports. Managing business is a
‘team game’ and the board is placed a rung higher than the CEO. <span style="mso-spacerun: yes;"> </span></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-54655496839205231532017-07-10T07:33:00.001-07:002017-07-10T07:33:26.628-07:00Should employees get primacy in corporate governance?<div dir="ltr" style="text-align: left;" trbidi="on">
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Large number of jobs in the Information
Technology (IT) sector is at stake. Automation and new technology are
disrupting the industry. Skills that created value so far are becoming
redundant. New skills are required to work with new technologies, such as, Big
Data, artificial intelligence, Internet of Things, robotics and virtual
reality. Companies have started up-skilling existing employees and recruiting
those with required skills. Employees, who are unable to acquire new skills,
are losing jobs.</div>
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<span lang="EN-US">In the above context two questions have
emerged. The first question is whether it is better for the top management to
take pay cut rather than to layoff employees in difficult years. The other
question is whether IT employees should form union to protect their interest
when the going is tough. The first question is relevant when the job loss is
due to a slow down, which is transitory. In that situation, the pay cut by the
top management will be for a short period in order to retain the talent that
will be used after the bad period is over. It is not relevant when jobs and
skills become redundant due to disruption caused by technological advancement or
some other mega event. The second question is relevant in all situations from
the perspective of employees. Bargaining power is relevant in all types of
negotiations and collective bargaining is desirable when individual bargaining
power is low. Protecting the job during tough times or securing adequate
compensation when a job is lost requires hard negotiation with the employer.
Therefore, it is no surprise that employees, including IT employees, have the
propensity to form union. <o:p></o:p></span></div>
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<span lang="EN-US">There are no straight answers to both the vexed
questions.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span lang="EN-US">Although the IT industry is in focus at
present, such disruptions occur in almost all industries with fast changing
technological, social and geo-political environment. Therefore, it is
appropriate to examine the issue from the perspective of corporate governance. <o:p></o:p></span></div>
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<span lang="EN-US">Companies create value through its
operations while complying with law and social norms, and taking care of the
social and environmental concerns. A very small portion of the value is shared
with socially and/or economically marginalised population of the society
through Corporate Social Responsibility (CSR). Shareholders, customers,
providers of inputs (including human capital and debt capital), and government
share the value created by the company. Government gets its share through direct
and indirect taxes. Companies, through industry associations or otherwise,
lobby with governments to reduce their share of the value. The share of
customers and input providers in the value created by the company depends on
the market forces and their relative bargaining power vis-à-vis the company. The
share of shareholders is the residual amount. Shareholders’ primacy is well
established in corporate governance. Therefore, companies focus on creating
‘shareholder value’ while being ethical and fair to other stakeholders. There
are two reasons for the same. First, financial capital is sticky in the sense that
once invested in non-financial assets (such as, plant and equipment) to build
capacity, it cannot be recovered without substantial loss. Second, the
non-controlling shareholders after entrusting their fund to the company cannot
participate in strategic and operating decisions. In absence of focus on
creating ‘shareholder value’ and effective monitoring, the management might
misallocate the resources causing depletion of shareholders’ wealth
permanently. <o:p></o:p></span></div>
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<span lang="EN-US">Human capital is also ‘sticky’ like
financial capital. After completing substantial period of employment in a
company, employees develop specialised skills, which are not useful in other
industries. Consequently, their market value outside the industry is very low, almost
zero. Similarly, when business model or technology changes many of those skills
become redundant. Therefore, those who lose job due to change in the business
model or technology cannot find an alternative employment. In this context it
is important to consider whether employees should also be considered as a
primary stakeholder along with shareholders. Companies should focus on both ‘creating
shareholder value’ and ‘protecting and creating employee value’. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">It is not enough to merely honouring the initial
employment contract with an employee. It is important that employees are
trained to acquire skills that would be needed in future, when the company sees
disruption coming, that is, much before the disruption occur or the company
plans to change the business model. Companies should ensure alternative
livelihood for those who cannot acquire new skills, particularly if they are
low-paid employees. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The issue is complex, particularly because
companies engage large number of employees on short-term contracts and
off-role. It deserves serious debate among academicians, regulators and
practitioners of corporate governance. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-69677252021440547332017-06-13T06:38:00.001-07:002017-06-13T06:38:12.157-07:00Is investing in tobacco business unethical?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">The Bombay high court will hear a Public
Interest Litigation (PIL) filed by two Tata Trusts trustees along with five
others against the union government, the Insurance Regulatory and Development
Authority of India (IRDAI), LIC and other state-run insurance companies. The
PIL called on the high court to direct the public sector insurance companies to
divest their shareholding from the companies that are directly and indirectly engaged
in the tobacco businesses. The PIL argues that investment by those companies in
tobacco business is against the spirit and intent of the World Health
Organization’s Framework Convention on Tobacco Control (WHO FCTC), </span><span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">which is the health
treaty developed in 2003 in response to the globalization of the tobacco
epidemic. India became a partner of the treaty in 2005. <o:p></o:p></span></div>
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<span lang="EN-US">Tobacco consumption causes estimated six
million deaths per year globally, of which one million are in India.<span style="mso-spacerun: yes;"> </span>The production-related health hazards from
tobacco are also a matter of serious concern. </span><span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Tobacco farmers, farm-workers,
and bidi workers </span><span lang="EN-US">suffer from occupational illnesses
like ‘green tobacco sickness’ (GTS).<span style="mso-spacerun: yes;"> </span>Tobacco
consumption also has severe societal costs due to reduced productivity, health
cost burden and environmental damage. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">The
government, in conformity with WHO FCTC, has framed laws and taken steps for
reducing tobacco consumption and creating awareness about health hazards. It is
also working on reducing tobacco farming by developing economically beneficial alternative
crops and vocations for tobacco farmers. Results are visible, although the
progress is quite slow. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">In
spite of the disastrous health hazard from tobacco consumption, an average
investor would consider including investment in a company that is in tobacco
business in her/his portfolio of investment. An average investor behaves
rationally. Therefore, so long as she/he estimates that the company would
continue to create shareholder value, she/he would consider investing in the
company. She/he uses ‘environmental, social and governance’ (ESG) criteria to
assess business risks of the tobacco business (say, risks from tighter
government regulations, falling sales volume and activism against tobacco consumption)
and factors in the same in valuing the company’s equity. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Is
there any ethical or moral issue in investing in tobacco business, which is a
legal activity? Ethical considerations transgress the legal boundary.
Therefore, some argue that it is immoral and unethical to invest in the
production and sale of those products, the production and/or consumption of
which harms the society. ‘Ethical investing’ (also called socially responsible
investment, or sustainable, responsible and impact investing) is an old
concept. Ethical investing requires using ESG criteria, in addition to
financial criteria, in deciding investment in a particular industry or a
particular company. It uses ESG criteria not to assess business risks, but to
assess impact of the business on environment and society. Investors who believe
in ethical investing would not invest in so-called ‘sin’ industries (e.g.,
tobacco, alcohol, gambling and military weapons), the products or processes of which,
in their judgement, are harmful to the environment or society. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">I
think whether to invest in companies operating in ‘sin’ industries is a matter
of personal choice based on one’s own individual ethical standards. For
example, an oncologist, who experiences the trauma of her patients, may believe
that investment in tobacco business is unethical. Similarly, ethical standards
of individuals are often developed based on prescriptions and proscriptions in
scriptures of their religion. However, in general, it is not immoral to invest
in a company, which is allowed to operate by the parliament, even if it
operates in a ‘sin’ industry. Parliament, in its collective wisdom, allows certain
business activities and prohibits some others after taking into consideration public
opinion and socio-economic impacts and weighing social costs and benefits of a
particular business activity at a particular point in time. For example, in
2016 the central government issued complete ban of </span><span lang="EN-US">manufacture
and sale chewable tobacco and nicotine, while it continues to allow production
and sale of other tobacco products like cigarette and bidi. Parliament, by
allowing a business to operate, conveys social approval to the business. Investing
in a company, which is engaged in a legal business and complies with applicable
laws (including soft laws) and social practices, is not unethical, because it
passes the ‘social legitimacy’ test. Rather, it is unethical to invest in
companies, which adopt unethical practices and flout regulatory and social
norms, irrespective of the industries in which they operate. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">It
is inappropriate to restrain the government or PSEs from investing in companies
like ITC, which provides superior return on investment. LIC, as a custodian of
policyholder’s money, should act like a rational investor in building the
investment portfolio. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-23997188907107025422017-05-07T18:54:00.003-07:002017-05-07T18:54:58.580-07:00Integrated reporting and shareholder value<div dir="ltr" style="text-align: left;" trbidi="on">
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In
February 2017, Securities and Exchange Board of India (SEBI) had issued a
circular advising top 500 listed companies, which are required to publish
Business Responsibility Report (BRR) annually as a part of their annual report,
to voluntarily adopt integrated reporting from 2017-18. The International
Integrated Reporting Council (IIRC) has issued Integrated Reporting Framework.
IIRC is a global coalition of regulators, investors, companies, standard
setters, the accounting profession and NGOs.</div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
report is directed to investors, but is useful to other stakeholders as
well.<span style="mso-spacerun: yes;"> </span>It tells the complete story of
value creation holistically in a concise manner. It provides investors with
information that is relevant for assessing the sustainability of the business
model of the company. Integrated Reporting Framework identifies five types of
capital (resources): financial capital, manufactured capital, intellectual
capital (including organisational capital), human capital, social and
relationship capital, and natural capital (e.g., air, water, mineral, forest,
bio-diversity and eco-system health). All the resources that a company uses to
create value are not owned by it. For example, government or some third party might
own infrastructure (e.g., ports and bridges) that is used by the company. Some
natural resources (e.g. air) are not owned by anyone. <span style="mso-spacerun: yes;"> </span>In the process of creating value the company
transforms one form of capital into another form of capital and increases value
of some capital while reducing that of others. A company creates value only if
the net outcome is positive. The term ‘value as used in integrated reporting may
be perceived as ‘social value’, which is the total of value created for
shareholders and value created for other stakeholders. A business model that
destroys social value is not sustainable. It is true that in most situations it
is difficult to quantify the outcome, but a qualitative assessment is possible.
Therefore, integrated report provides a blend of quantitative and qualitative
information. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
report focuses on future and describes how well the company is managing environmental,
social and governance (ESG) issues. For example, integrated report provides
insight into how the company is managing its relationships with its key
stakeholders, including how and to what extent the company understands, takes
into account and responds to their legitimate needs and interests. Similarly,
it provides insight into how the business model affects natural capital. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
report also provides information on how the firm integrates different
components of the organisation and how it integrates short-term, medium-term
and long-term strategies. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
Reporting Framework requires that the report should include a statement from board
of directors (hereafter board) that includes: an acknowledgement of its responsibility
to ensure the integrity of the integrated report; an acknowledgement that it
has applied its collective mind to the preparation and presentation of the
integrated report; and its opinion or conclusion about whether the integrated
report is presented in accordance with the Integrated Reporting Framework.
Board’s involvement with the preparation of the integrated report adds value to
the board’s performance as it compels the board to understand the complete
process of value creation and ESG issues and inculcates the culture of
‘integrated thinking’. This culture percolates down to the lower levels in the
organisation. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">The
construct of ‘social value’ is not in conflict with the construct of
‘shareholder value’. The fundamental value (also called intrinsic value) of a
business does not depend on its ability to generate short-term profits. It
depends on the perceived ability of the business to generate free cash flows
(FCF) over a long period. FCF refers to the cash flow that is available to
owners for spending on purposes other than the business purposes. If forces
(e.g., government, pressure groups, regulators, courts of law) that relate to
ESG issues are going to be material to the business, the board, management and
investors have to worry about those and the board and the management have to
decide what to do about those issues. Eventually, those things will affect FCF.
Therefore, a company that fails the address ESG issues and does not create
‘social value’ would not be able to create the shareholder value.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
report is an excellent tool to communicate to investors clearly how the company
is managing ESG issues. In absence of that clear communication the value of the
equity in the capital market lags the fundamental value of the company, as
investor perceives higher risks arising from poor management of ESG issues. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Integrated
reporting is evolving globally. The SEBI move will accelerate the evolution.
Over time, integrated report should replace Management Discussion and Analysis
and Business Responsibility Report, both of which, at present, form part of the
annual report.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-74795654178194561302017-04-10T06:25:00.003-07:002017-04-10T06:25:42.225-07:00Infosys Saga - Issues in Corporate Governance<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">Infosys Limited, which is a global leader
in IT technology and consulting, is in the news after the founder-shareholders,
who together hold around 13 per cent of the outstanding equity shares, voiced
their concern over certain corporate governance issues. A whistleblower has
raised same issues in a letter to the SEBI. They relate to alleged overpayment
in the acquisition of Panaya, in which Hasso Plattner, who is the cofounder of
SAP (the company in which the CEO of Infosys Mr. Vishal Sikka worked earlier),
had 8.33 per cent shareholding; and unusually high severance pay of Rs 17.38
crores (actually paid Rs 5.2 crores) to the erstwhile CFO (Rajiv Bansal), who,
according to the whistleblower, initially was not in agreement with the
acquisition of Panaya. According to N R Narayan Murthy, the highly respected
founder of the company, the high severance pay could be ‘hush money’ to silence
Mr. Bansal. Other issues raised by the founders are the significant pay-hike of
Mr. Sikka, departure of a former compliance officer David Kennedy with significant
severance pay and appointment of Punita Kumar Sinha, who is the wife of a minister
in the central government. <o:p></o:p></span></div>
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<span lang="EN-US">Across the globe outside blockholders
(large shareholders who do not occupy a position in the board or executive
management) monitor the performance of the board and directly intervene, for
example, by writing letters to the chairperson communicating suggestions and
concerns or raising issues in general meetings. Therefore, intervention by the
founder-shareholders of Infosys is not a surprise. The use of the public forum
(e.g. Media) to raise issues is. <o:p></o:p></span></div>
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<span lang="EN-US">The allegation that the board had approved
payment of ‘hush money’ to the former CFO in the form of unusually high
severance pay is a very serious allegation. The board on its part got the issue
investigated by a highly reputed law firm (Cyril Amarchand Mangaldas), which
did not find any wrongdoing or cover up of wrongdoing. Ostensibly, the founders
were not satisfied with the investigation. If, founders believe the high
severance pay was ‘hush money’, they should have taken recourse to options
available in the Companies Act. For example, they could call EGM for removing
the chairman of the board and chairman of the nomination and remuneration
committee from the board. Indicting the board for wrong doing and pressurizing
the chairman to resign by making noise in the media is an undesirable
shareholder activism, which harms the company more than benefitting it. <o:p></o:p></span></div>
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<span lang="EN-US">Excessive compensation to the CEO and members
of senior management is always an issue in corporate governance. The board has
the responsibility to critically examine the employment contracts with them before
approval. The Infosys board has indirectly accepted that high severance pay to
former CFO was an error. This is definitely a failure of the nomination and
remuneration committee. <o:p></o:p></span></div>
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<span lang="EN-US">Founders had expressed concern about the
increase in the ratio of CEO salary to the median salary. Although it is
generally believed that the high ratio reflects poor corporate governance, there
is no norm. High ratio of CEO’s pay to median pay is not always against the
principle of ‘fairness to all employees’. An independent board should apply its
judgement based on the demand and supply of capabilities that are required for different
positions/jobs for strategy implementation. Usually the board benchmarks salary
with salary levels in comparable companies. For example, as Mr. Sikka has an opportunity
to work for a global company in a similar position in USA and he is allowed to
operate from USA, his compensation should be comparable to a CEO in a global IT
company operating from USA. On the other hand, salary of employees located in
India should be comparable to salaries in global IT companies operating from
India. It could be the reason that the ratio of Mr. Sikka’s compensation to the
median compensation in Infosys has exceeded the earlier normal. <o:p></o:p></span></div>
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<span lang="EN-US">It goes without saying that if the SEBI finds
truth in the whistleblower’s allegations of unethical practice, the board
should be held responsible. On the other hand it would be a mistake to hold
Infosys hostage to its founders’ original approach to business. A ‘way of doing
business’ is not the same thing as ‘core values’ like a commitment to integrity
and ethical standards, mutual respect and fairness to all stakeholders. The
latter should certainly not change. But to raise a certain way of doing
business to the same status as these fundamental values can only do a
disservice to the company and leave it without the ability to adapt to changing
business contexts. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-63111283872567924142017-03-13T02:15:00.001-07:002017-03-13T02:15:33.506-07:00Will SEBI Guidance Improve Board Evaluation?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">The
Companies Act 2013 and the Securities and Exchange Board of India’s (SEBI)
(Listing Obligation and Disclosure Requirements) Regulation 2015 mandate Board evaluation,
which is the evaluation of the functioning of the board of directors (hereafter
Board), evaluation of the chairman, individual directors and the board process.
Companies Act requires that every listed company and every other public company
having a paid up share capital of twenty five crore rupees or more at the end
of the preceding financial year shall include in Board report a statement
indicating the manner in which annual Board evaluation has been made. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Board
evaluation is an effective tool for improving Board performance. It is a kind
of self-evaluation. Like any other knowledge group, the Board evaluates its
performance periodically to identify areas for improvement and develop an
action plan to improve the performance. Another objective of evaluating
individual directors is to identify under-performing directors and to weed them
out. A weak chairperson should also be removed. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">In
January 2017 SEBI has issued Guidance Note on Board Evaluation. The preamble
says that the objective of the Guidance Note is to provide guidance to those
listed companies, which do not have much clarity on the process of Board
evaluation. Board evaluation is new in India, but it is decades old in USA,
Europe and some other parts of the world. Literature on Board evaluation is
easily available. Any company that is serious about Board evaluation can
develop and implement the process by going through the available literature.
Moreover, there are professionals who advise companies in developing and
implementing the process of board evaluation. Therefore, the lack of clarity cannot
be a reason for not implementing Board evaluation in the right spirit. Those
companies that have not implemented Board evaluation in true spirit are not
serious about it. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Board
evaluation is meaningful only if the Board is empowered for doing what it is
expected to do – to guide and advise the executive management (the CEO and
his/her team), monitor it in order to protect the interest of non-controlling shareholders
(also called minority shareholders) and facilitate net working with external
resources. Board evaluation improves the performance of even those Boards,
which focus on the advisory role rather than the monitoring role. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">It
is wrong to assume that every public company is motivated to develop and
implement an effective Board evaluation process. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">In
family-managed companies the dominant shareholder monitors the executive
management closely and does not require the Board to monitor it. In most of
those companies, the dominant shareholder appoints and if necessary, removes
the CEO, Key Management Personnel (KMP) and the members of the senior
management team. The Nomination and Remuneration Committee (NRC) does not play
any significant role in this regard, although the Companies Act has made NRC
responsible for the same. Similarly, the NRC does not play any significant role
in the appointment and removal of directors and in succession planning. NRC approves
the decisions of the dominant shareholder. In those companies, the dominant
shareholder takes strategic decisions, as he/she understands the business and
its environment much better than independent directors and relies on his/her
entrepreneurial spirit and business acumen, rather than on the collective
wisdom of the Board. Minority shareholders expect the Board (read independent
directors) to protect their interest from the opportunistic behaviour (e.g.,
tunneling of funds for self-enrichment) of the dominant shareholder. But in
those companies, independent directors are not independent, as they are selected
by the dominant shareholder and enjoy the office at his/her pleasure. The
dominant shareholder does not want an effective monitoring by the Board.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">In
most family-managed businesses, the Board is an ornamental Board. The dominant
shareholder selects independent directors from professionals drawn from diverse
fields to add to the ornamental value of the Board. The Board discusses routine
matters (e.g., performance evaluation) at great length, spends less time on
important issues (e.g., strategic issues) and ultimately approves whatever
proposal is presented before it. Ornamental Boards do not have an urge to
improve performance. The dominant shareholder does not see any value in Board
evaluation. The focus is on family governance and family values. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">Some
family businesses, which operate in a volatile, uncertain, complex and ambiguous
(VUCA) business environment, or want to attract institutional investors and
foreign capital, are motivated to adopt good corporate governance practices and
build an effective Board. SEBI Guidance will help them to improve the Board evaluation
process. Others will use it as a reference point just for preparing the
disclosure in the Board report without implementing Board evaluation seriously.
<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-80287844731164044092017-02-12T17:56:00.002-08:002017-02-12T17:56:30.911-08:00EGMs of Tata Companies - Some Reflections<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">Small investors lack capabilities,
resources and motivation to exercise the voting right in general meetings. But
block holders (those who hold more than 5 percent shares) and institutional
shareholders have the capacity and resources to analyse the outcome of a
proposal on the performance and governance of the company. Therefore, it is
their solemn duty to exercise the voting right. However, institutional
shareholders sometimes abstain from voting. Even in highly publicised and high
voltage EGMs of Tata companies, which were held in December 2016 to remove Mr.
Nusli Wadia as independent director, voting by institutional shareholders was
75.02 percent in Tata Steel, 69.23 percent in Tata Motors and 57.08 percent in
Tata Chemicals. This implies that some institutional shareholders abstained
from voting. With electronic voting, the cost of exercising the voting right is
almost zero. Therefore, the only reason for abstaining is that the
institutional shareholder does not want to take a position, for example, in a
controversial issue or where two powerful groups are involved, as voting either
way might hurt its own business interest. But in the process it hurts the
interest of its shareholders, unit holders or policyholders, as its return on
investment in the investee company depends on the quality of governance and
management of the that company. At the macro level, abstaining from voting
hurts the country, as shareholder activism improves the quality of corporate
governance in the country. As the institution on independent directors is
inherently weak, only shareholder activism can protect minority interest and
interest of other stakeholders.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">As on September 30, 2016 the promoter group
controlled 32.43% of Tata Motors, 31.35% of Tata Steel and 30.80% of Tata Chemicals.
On December 13, Tata Group acquired additional 1.73 per cent shares in Tata
Motors. Therefore, there is no surprise that resolutions to remove Mr. Wadia were
passed with significant majority. In case of Tata Steel 90.80 percent of votes polled
were in favour of removing Mr. Wadia. The same was 71.20 percent in case of
Tata Motors and 75.67 percent in case of Tata Chemicals. Had the company law
required special resolution (three-fourth majority) for removing an independent
director, Mr. Wadia could not be removed from Tata Motors and in case of Tata
Chemicals it would have been a close call. It might be appropriate to debate
whether, in order to protect the independence of independent directors and to
strengthen the institution of independent directors, the law should require a
special resolution for the removal of independent directors.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Primary responsibility of independent
directors is to protect the interest of non-controlling shareholders (commonly
called minority shareholders). Therefore, it is appropriate that minority
shareholders should have significant say in the removal of independent
directors. For example, in case of Tata Chemicals, 51.45 percent of votes of
institutional shareholders went against the resolution for the removal of Mr.
Wadia, but that was not reflected in the overall result. In case of Tata
Motors, institutional shareholders were almost equally divided in favour of and
against the resolution. 49.94 percent of votes of institutional shareholders
went against the resolution. However, the story was different in case of Tata
Steel. 82.48 percent of votes of institutional shareholders went in favour of
the resolution. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">When the controlling shareholder proposes
to remove an independent director, its 100 percent vote is polled in favour of
the resolution. Therefore, it is easy to pass an ordinary resolution (simple
majority). For example, if 30 per cent shares are held by the
controlling-shareholder, the ordinary resolution will be passed, even if all
public shareholders vote and 70 percent of their votes go against the
resolution. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">It is reasonable to assume that 70 percent
vote of institutional-shareholders and 5 percent vote of public shareholders
(other than institutional shareholders) are generally polled. In that situation,
if institutional shareholding is 40 percent or less, the resolution will be
passed as ordinary resolution even if all the votes of institutional
shareholders and other public shareholders go against the resolution. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">With those assumptions, if, institutional
shareholders hold 10 per cent or less voting rights, the resolution will be
passed as special resolution even if all public shareholders (including
institutional shareholders) vote against the resolution. If, institutional
shareholders hold 40 per cent voting rights, the resolution will be passed as
special resolution even if around 50 percent of votes of public shareholders
(including institutional shareholders) go against the resolution. <o:p></o:p></span></div>
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<span lang="EN-US">Therefore, there is a strong case for
mandating that the resolution for the removal of independent directors should
be treated as ‘special resolution’. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-19307781391816514692017-01-16T18:56:00.001-08:002017-01-16T18:56:09.753-08:00Independent directors - inherently weak institution<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">Tata Steel, Tata Motors and Tata Chemicals will
hold extra-ordinary general meetings (EGM) in December 2016 to remove, at the
request of Tata Sons, Nusli Wadia and Cyrus Mistry from the board of directors
(here after ‘Board’). Nusli Wadia is an independent director and Cyrus Mistry was
removed as the chairmen of Tata Sons on October 24, 2016. Removal of an
independent director through the formal process of passing a resolution is
unprecedented. <o:p></o:p></span></div>
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<span lang="EN-US">The Companies Act 2013 provides that shareholders
may remove a director before the expiry of his term by passing an ordinary
resolution in a general meeting. The concerned director has the right to make
representation before the shareholders. <o:p></o:p></span></div>
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<span lang="EN-US">Tata Sons’ move to remove an independent
director shows the weakness of the institution of independent directors. The
most important role of independent directors is to protect the interest of
non-controlling shareholders (also called minority shareholders). They are
expected to protect minority shareholders from strategies and other decisions
of the management that are detrimental to the interest of the company.
Therefore, situations might arise in which independent directors do not support
the proposals placed before the Board. In that situation, the controlling
shareholder can easily get rid of the dissenting independent directors. Removal
of all the dissenting independent directors together gives a signal to the
market that something is wrong in the company. Therefore, the controlling
shareholder, to subdue dissenting voices, would remove that independent
director who assumes the leadership role. Usually a polite request to resign
works, as independent directors lack the motivation to take the role of a
crusader. If that does not work, the controlling shareholder, like Tata Sons, can
make the Board to call an EGM and remove the dissenting independent directors. Removal
requires simple majority of all those who vote on the resolution. If, the
controlling shareholder holds more than 50 percent of voting right, resolution
would certainly be passed. Even if the controlling shareholder has less than 50
percent voting right, the resolution is likely to be passed, as
non-institutional shareholders lack enthusiasm for voting in general meetings.
Only if the institutional shareholding is substantially high, as in the case of
Tata Steel (institutional shareholding 42% against promoter’s holding of 32%),
institutions’ voting is key in passing the resolution. Rationally, an
institutional shareholder should vote in the interest of the company rather
than siding with the controlling shareholder blindly unless its internal
governance is weak. However, if consensus cannot be reached among institutional
shareholders to vote against the resolution, the probability of passing the
resolution remains high. <o:p></o:p></span></div>
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<span lang="EN-US">Tata Sons alleges that Nusli Wadia was ‘galvanizing
other independent directors against Tata Sons’. This is a curious allegation.
Every independent director is a leader and develops his/her own perspective of
the situation and develops his own views on how to address an issue. It is
natural that in a separate meeting of independent directors, every independent
director will try to build a consensus around his view/solution, which he/she
considers the best alternative. In the meeting, independent directors listen to
each other and may change their views. But it is not necessary that a consensus
will be reached. If the view of a particular independent director does not fit
into the scheme of the controlling shareholder, he may always be accused of
‘galvanizing other independent directors against the controlling shareholder’,
because of his/her efforts to build consensus around his/her view. This cannot
be a good reason for removing an independent director.<o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">SEBI
(Listing Obligation and Disclosure Requirements) Regulations 2015 requires that
if the chairperson of the Board is a non-executive director at least one-third
of the Board shall comprise of independent directors and if the entity does not
have a regular non-executive chairperson, at least half of the Board shall
comprise of independent directors. In absence of consensus, Board decisions are
taken using majority rule. Non-independent directors are subservient to the
controlling shareholder. Therefore, even if majority of independent directors
do not support a decision, the Board can approve the same with the support of some
independent directors. <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">In
a family business and in companies in which there is concentration of ownership,
independent directors are, at best, effective sounding boards for the
management. They cannot protect the company’s interest effectively. Tata Sons
by its move to remove Nusli Wadia is creating a bad precedence that will
further weaken the inherently weak institution of independent directors. It
gives credence to the general belief that only those independent directors, who
maintain cozy relationship with the controlling shareholder, survive.<o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-44745533927676315962016-12-12T05:51:00.000-08:002016-12-12T05:51:21.911-08:00Managing complexities in corporate governance<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">Tata Sons is a private limited company that
controls Tata Group companies. This is a 148 years old $100 billion
conglomerate with large number of private limited companies and 29 listed
companies. In some large listed Group companies the promoter (Tata Sons and
others) holds less than 50 per cent voting rights (e.g. Tata Motors 32.45% and
Tata Steel 31.55%). Sir Dorabji Tata Trust and Sir Ratan Tata Trust along with
some other Tata Trusts hold 66% stake in Tata Sons. Mistry's family, the
Shapoorji and Pallonji Group, owns 18.5% stake in the company. Sir Dorabji Tata
Trust and Sir Ratan Tata Trust have powers to appoint or remove a chairman of
Tata Sons with their own three-member quorum of the selection panel. Ratan Tata
chairs those two trusts. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
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<span lang="EN-US">Abrupt removal of Cyrus Mistry from the
position of the chairman of Tata Sons, on October 24, 2016, was an unusual
event. In India or elsewhere the board of directors (hereafter board) seldom
sacks the CEO so abruptly. Ratan Tata, who is the patriarch of the family that
founded the Tata group, has come back as interim chairman. Earlier he served as
chairman for two decades. Tata Sons saga is not about clash for power. It is
not about ego clash between two individuals. It is about managing complexities
in corporate governance.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
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<span lang="EN-US">Tata group has 4.1 million shareholders.
Shareholders and other stakeholders have a right to know why Mr. Mistry is
removed. Unfortunately, Tata Sons has not communicated clearly the reasons for
his removal. Good corporate governance requires high level of transparency.
Shareholders and stakeholders have a right to get adequate information on
important decisions and group’s operating policy. Maintaining right level of
transparency is a challenge in corporate governance. It is often difficult to
assess how much to disclose publicly so that the group/company is not hurt while
shareholders and stakeholders receive adequate information.<o:p></o:p></span></div>
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<br /></div>
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<span lang="EN-US">From the narratives in media it appears
that Mr. Mistry was handling things differently from the way things were
handled by Mr. Tata. This difference in approach frustrated Mr. Tata and it has
lead to the removal of Mr. Mistry. A CEO who cannot get along with the
controlling shareholder cannot survive. Therefore, true professionalization of
a family business is difficult unless the family takes a hands-off approach and
gives ‘free hand’ to the CEO. It is not easy. Succession planning, in general,
is a challenge in a family business. For smooth transition, the family
governance should be good and a successor from within the family should be
identified early and he should be groomed over years. The problem magnifies if
none within the family is available to take up the baton. It is difficult to
get an outsider who will be in tune with values, ethos and business approach of
the family. Mr. Mistry is not exactly an outsider. He is related to the Tata
family through marriage and his family has significant shareholding in Tata
Sons. He is a director in Tata Sons since 2006 and was groomed for a year, yet Mr.
Tata developed the conviction that Mr. Mistry was not in tune with the values,
ethos and business approach of the Tata group. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
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<span lang="EN-US">With hindsight some strategic choices made
by the Tata group appears to be wrong. It might be that some of those choices
were driven by Mr. Tata’s aspirations and passion, rather than by sound
economic rationale. It is not uncommon that in a company where there is
concentration of shareholding, corporate strategy and business strategies are
driven by the personal aspiration of the controlling shareholder. Quite often,
after long deliberations, the board rationalises the strategic choices of the
controlling shareholder. This hurts the interest of non-controlling
shareholders, particularly if the controlling shareholder focuses on empire
building rather than on value creation. <o:p></o:p></span></div>
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<span lang="EN-US">On November 4, 2016 all the seven
independent directors of India Hotels Company Limited (IHCL), in which the
promoter holds 38.65 per cent shares, reposed full confidence in the leadership
of Mr. Mistry. They praised the steps taken by him in providing strategic
direction and leadership to the company. They communicated their views to the
Bombay Stock Exchange (BSE). If, boards of other companies, in which the Tata
Sons holds less than 50 per cent voting rights, act similarly, the relationship
between those operating companies and Tata Sons shall be redefined. It is
difficult to assess whether this will benefit or hurt the non-controlling
shareholders of operating companies.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">As the events will unfold in coming days,
we shall develop better understanding of how the group will operate in future. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-2590632735326746262016-11-13T17:45:00.000-08:002016-11-13T17:45:06.441-08:00Rotation of auditors - its side effects<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US">The Companies Act 2013 has introduced
important audit reforms. One of the important reforms is rotation of the
auditor. All listed companies, unlisted public limited companies having paid up
share capital of Rs ten crore or more, all private limited companies having
paid up share capital of Rs twenty crore or more, and all companies having
public borrowings from financial institutions, banks or public deposit of Rs
fifty crore or more are required to rotate their auditor. An individual cannot
continue as an auditor for more than one term of consecutive five years and an
audit firm cannot continue as an auditor for more than two terms of consecutive
five years, that is a consecutive period of ten years. The cooling off period
is five years. The Companies Act allows three-year time for complying with the
provision. Therefore, the provision must be complied by April 1, 2017. The
objective is to enhance the audit independence. This is expected to improve audit
quality resulting in improved financial reporting. <o:p></o:p></span></div>
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<span lang="EN-US">Traditionally companies do not change their
auditors except in exceptional circumstances. In Large number of companies that
are required to rotate the auditor, auditors have already completed more than
ten years/five years of providing auditing service. Those companies will change
their auditor effective from 2017-18. <o:p></o:p></span></div>
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<span lang="EN-US">Local firms dominate Indian audit market. However,
the presence of Big 4 audit firms (Deloitte, PWC, E&Y and KPMG) cannot be
ignored. Big 4 are the largest professional service network in the world. They
provide audit, assurance, tax, consulting, advisory, actuarial, corporate
finance and advisory services. In India, they cannot provide audit services
directly. Therefore, they provide services through network of local firms. It
is alleged that they flout the rules in order to provide audit and assurance
services. Many foreign investors put a condition that the auditor of their
choice should be appointed. This helps the Big 4 audit firms to grow in India. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Local firms audit 62 per cent of the BSE
five hundred companies. There is an apprehension that many companies that get
their accounts audited by local firms will appoint one of the Big 4 or other
large international professional service network (e.g. BDO, RSM, Grant Thornton
and Baker Tilly) as their auditors. If that happens, the local firms will lose
out. It is reported that large 20 local firms have written to the government to
intervene to protect their interest. On September 30, 2016, the Ministry of
Corporate Affairs has notified constitution of a three member expert group to
look into the complaint that Big 4 are circumventing rules and to find ways to
help local firms. <o:p></o:p></span></div>
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<span lang="EN-US">Most local firms are small and they do not
face any threat from Big 4 and other international firms. They are mostly
located in tier II and III cities and small towns. They provide variety of
services to small companies. They lack aspiration to become big. <span style="mso-spacerun: yes;"> </span>Big 4 and other international firms engage
members of the Institute of Chartered Accountants of India (ICAI) to deliver
audit and assurance services. In this context, presence of Big 4 firms does not
hurt the auditing profession. Therefore, it is debatable whether there is a
case for government’s intervention to protect local audit firms.<o:p></o:p></span></div>
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<span lang="EN-US">A proposal is taking round that the
government should mandate joint audit with at least one local auditor to create
professional opportunities for local firms. This is unwarranted. This will
increase the auditing expenses. The audit committee of a company should assess
the need for the joint audit and the company should decide whether it should
have joint audit. No rule should be framed to create jobs for a profession,
particularly for one that is matured. <o:p></o:p></span></div>
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<span lang="EN-US">Chartered Accountants are prohibited from
soliciting professional work through advertisement or otherwise. But they can
respond to tenders. The practice of issuing tender for the appointment of
internal auditors is quite common among public enterprises. Such a practice is
not common among private-sector companies. Companies usually do not issue tender
for the appointment of statutory auditors. Tendering is the right method to
search for the right audit firm. This increases the choice and reduces auditing
cost through competition. Companies should not limit their choice to Big 4 and
other international firms or a few large local audit firms. There are local
firms that have capabilities to audit large and complex transactions. Search
through tendering process would help to identify such firms. <o:p></o:p></span></div>
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<span lang="EN-US">It will be interesting to see how the new
rules regarding rotation of auditors will actually impact the auditing
profession. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com2tag:blogger.com,1999:blog-4122992485611466008.post-36455867654395569592016-10-09T21:51:00.002-07:002016-10-09T21:51:32.295-07:00Boards must adopt integrated reporting framework<div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="mso-bidi-font-family: "Times New Roman";">BOARDS MUST ADOPT INTEGRATED
REPORTING FRAMEWORK</span></b></div>
<br />International Integrated Reporting Council (IIRC) had issued the Integrated Reporting Framework in December 2013. Integrated report communicates the complete story of value creation concisely to enable investors and other stakeholders to assess the ability of the company to create value over long term. It tells how an organization's strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term. Enlightened-companies use the term ‘value’ in much broader sense than what is understood by the term ‘shareholder value’. Shareholder value is created when the company is able to generate return on financial capital that is higher than the cost of capital over a long period of time. Enlightened-companies realise that the ability to create shareholder value hinges on the ability to create societal value. This perception is captured in the Companies Act 2013, which states: “A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.”<br /><br />Integrated Reporting Framework identifies six types of capital (resources) that companies use to create value. Those capitals are, financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital and natural capital. Those include capitals that are not owned or controlled by the company. For example, manufactured capital includes roads and other infrastructures not owned or controlled by the company. None owns some items of natural capital (e.g., clean air). Companies through its activities and outputs create, reduce and transform capitals. A business model is sustainable only if it results in accretion to the net value, taking all the capitals together. Therefore, the management and the board of directors (here after, Board) need to understand the interdependencies and tradeoffs between various capitals and how their availability in future would affect the long-term sustainability of the business model. <br /><br />One of the guiding principles in the Integrated Reporting Framework is ‘connectivity of information’. Connectivity of information is logical. It is about connectivity between: external environment; governance, opportunities and risk, strategy and resource allocation, business model, performance, and, future outlook; past, present and future; the capitals; financial and other information; qualitative and quantitative information; management information, Board information and information reported externally; and information in the integrated report, information in company’s other communications and information from other sources. <br /><br />Connectivity of information can be achieved only through ‘integrated thinking’. Integrated thinking refers to holistic approach in decision-making. The Integrated Reporting Framework describes integrated thinking as, “The active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects. Integrated thinking leads to integrated decision- making and actions that consider the creation of value over the short, medium and long term.” <br /><br />In addition to establishing right processes, changes in behaviours, culture and leadership styles are required for implementing ‘integrated thinking’. Sharing of information across the organisation and consideration of fresh perspectives presented by employees in decision-making are essential for integrated thinking. These require building greater trust between leaders and employees. Close collaboration between different units and functions are required to draw right knowledge and experience and develop holistic view in decision-making. Strengthening the engagement with external stakeholders is necessary to understand stakeholders’ perspective and value in order to ensure that the strategy is sustainable for the long term in changing external contexts. Transparency in decision-making is necessary to develop a shared understanding the business model and broader strategy to enable employees to work for a common goal.<br /><br />The concept of ‘integrated thinking’ is logical and simple, but it is challenging to apply the concept in practice. The traditional mind set of focusing on shareholder value, financial information and quantitative data and hierarchical leadership style make adoption of integrated thinking difficult. It takes years to fully embed integrated thinking in decision-making. The Board has to take the responsibility of overseeing that the company is moving towards developing necessary processes and culture to support integrated thinking. The Board should deliberate on all material factors that significantly affect the ability of the company to create value in the short-term, medium-term and long-term. It might be a good idea for Boards of companies to start the journey by adopting Integrated Reporting Framework for internal reporting to the Board. Companies should aim issuing integrated report to investors as early as possible in order to build trust with wider stakeholders.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-14098267308889647602016-09-12T01:08:00.000-07:002016-09-12T01:08:08.267-07:00Boards should Focus on Disclosures and Auditors’ Independence<div dir="ltr" style="text-align: left;" trbidi="on">
<h1>
<span lang="EN-US">Boards should Focus on Disclosures and Auditors’
Independence</span></h1>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">When, in the recent quarter, performance of
Infosys failed to meet the market expectations, the media reported it as the
first failure of Vishal Sikka, who is the CEO of the company. The media gives
total credit for the consistently excellent performance of ITC to Yogi
Deveswar, who is the Chairman and CEO of the company for quite a long time. Cyrus
P Mistry had revised the strategy of the Tata Group, when he took over as the
chairman of the Group. It is obvious that the media and the market believe, and
rightly so, that the Board does not contribute significantly in the performance
of the company. The leadership qualities and managerial capabilities of the CEO
(and his team) determine the performance. In case of companies, where the
controlling shareholder runs the company directly or through its nominee, the
performance of the company reflects the quality of decision-making by the
controlling shareholder. The board of directors (Board) gives free hand to the
CEO to manage the company not only because it is right to do so, also because
independent directors’ understanding of the business is not adequate to give
directions to the CEO. Therefore, in ‘good times’, the Board plays the game to
give a semblance of some serious boardroom deliberations on strategy and other
critical issues. Of course, competent directors provide some valuable inputs. When,
product/service-market performance of the company shows continuous decline, the
Board asks certain persuasive questions, to the best of its capabilities. Even
in those situations, solutions come from an external consultancy firm appointed
by the management or from the management itself. The Board adds some value
while deliberating alternative solutions, only if the Board is diversified and
capable. Although, the Board remains passive, without intensive engagement with
the CEO, when the going is good, it is worth building a diversified and capable
Board, which can provide support to the CEO when needed. And in a crisis
situation, advantage of collective wisdom can be obtained. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">As the he Board gives freehand to the CEO,
it is expected to play an important role in the selection of the CEO and
his/her team. In this regards, the role of the Nomination and Remuneration
Committee (N&RC) of the Board cannot be overemphasised. The Companies Act
requires that every listed company, every public company with paid up capital
of ten crore rupees or more or turnover of one hundred crore rupees or more and
every public company having, in aggregate, outstanding loans, or borrowings, or
debentures, or deposits exceeding fifty crore rupees shall constitute a
N&RC. The committee consists of at least three non-executive directors, out
of which not less than one-half should be independent directors. N&RC has
the responsibility of identifying persons who are qualified to become directors
and who may be appointed in Senior Management. It is also responsible for
developing remuneration policy for directors, key managerial personnel (KPM)
and other employees. SEBI (Listing Obligations and Disclosure Requirements)
Regulations 2015 further requires, among others, that the Committee should
devise a policy to diversify the Board. Unfortunately, companies, except some
large and good companies, have adopted the tick-box approach in complying with provisions
related to N&RC.<span style="mso-spacerun: yes;"> </span>Therefore, in
practice, engagement of N&RC, and consequently the Board, in the selection
and appointment of directors, CEO, KMPs and employees in the Senior Management
is minimal. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">In practice, the Board does not have
substantive involvement either in people management or in the formulation and
implementation of strategy. Therefore, it should allocate its time to corporate
governance issues, rather than spending more time to review strategy and
performance in appearance only. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Investors and other stakeholders are not so
much concerned about what is happening within the Board. In any case, that is
unobservable. They evaluate the quality of corporate governance by catching
signals and symptoms. For example, they evaluate the level of transparency
accountability and equity adopted by the management; quality of family
governance (e.g., dispute resolution and succession planning); leadership
quality of the CEO and the leadership pool within the company; legal proceedings
against the company; qualifications in the audit report; relationships between the
CEO, promoter and the Board; relationships of the management with stakeholders;
reported management fraud; and company’s resilience to quickly respond to the
changes in the business environment. Boards should focus on those issues. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Unfortunately, Boards do not pay the
desired attention to the quality and level of disclosures in various internal
and external documents; and independence of statutory auditor and internal
auditor. Boards are required to shift the focus. <o:p></o:p></span></div>
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<br /></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-52009869635632900772016-08-08T03:56:00.000-07:002016-08-08T03:56:00.084-07:00AUDIT COMMITTEE’S RESPONSIBILITIES IN CO-SOURCING INTERNAL AUDIT<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
<span lang="EN-US">The Companies Act 2013 mandates appointment
of internal auditor by every listed company; every unlisted company having paid
up share capital of fifty crore rupees or more, or turnover of two hundred
crore rupees or more, or outstanding loans or borrowings from banks or public
financial institutions exceeding one hundred crore rupees, or outstanding
deposits of twenty five crore rupees or more; and every private company having
turnover of two hundred crore rupees or more, or outstanding loans or
borrowings from banks or public financial institutions exceeding one hundred
crore rupees. Earlier, statutory auditor was required to report the adequacy
and effectiveness of internal audit. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">The statutory recognition that internal
audit is an important monitoring and assurance service for improving corporate
governance is a milestone in the evolution of internal audit. The profession is
in the process of transition from ‘service to the management’ to ‘service to
the Board’. In order to serve the Board of companies, which are operating in VUCA
(Volatility, Uncertainty, Complexity, Ambiguity) environment and/or exploring
digital business model and automation, the internal audit function must acquire
variety of specialised skills. New skills are also required to conduct higher
level of audit (management audit) as a service the Board. In order to address
this challenge, co-sourcing has emerged as the most preferred model. The
Companies Act 2013 permits outsourcing of internal audit. It stipulates that
the internal auditor may or may not be an employee of the company. It further
stipulates that the Board shall decide to appoint a chartered accountant or a
cost accountant or any other professional as internal auditor. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Co-sourcing is a low-cost model for
acquiring the required capabilities. For example, traditionally, companies
outsource IT audit because it is costly to keep the knowledge updated on the
face of rapid technological changes, consistently evolving IT applications and emerging
cyber-risks and also because of difficulties in providing opportunities of
learning by doing. Another reason for co-sourcing is that companies find it
cheaper to appoint local professionals to audit activities/functions in
dispersed locations. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Outsourcing poses various challenges.
Setting up a good contracting arrangement is important. Expected standard of
service should be well articulated to enable the in-house team to monitor the
same. There should be clarity about contract termination and the in-house team
should ensure that it has access to working papers and documents even after the
termination of the contract. It is also important to manage differences in the
working practices used by outsourcing service providers and the policies
and norms followed by the in-house team. Therefore, co-sourcing is effective
only if the in-house internal audit team is strong and efficient. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Outsourcing complete internal audit with
skeleton in-house team is not a good idea. One disadvantage is that if the
in-house team is not constituted of senior-level executives, contract
management might fail. Moreover, in-house team is best bet for financial and
operation/process audit, as those audits requires in-depth knowledge of the
internal environment and business processes. Similarly, strategy audit and
audit of change initiatives cannot be left to an external agency due to
confidentiality concerns. <span style="mso-spacerun: yes;"> </span>Complete
outsourcing makes it difficult to integrate all assurance services, as the
outsourced service providers lack incentives for coordinating with other
assurance services. It also deprives the company of ‘add on’ services, like
consultancy and training, which are provided by the in-house internal audit team.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Internal audit serves the Board effectively
only if it is independent of management. It is the ‘third line of defence’
because other assurance services are not independent of the management. In
order to protect the independence of internal audit, outsourcing decisions
should be taken by the audit committee. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Co-sourcing of internal audit is like any
other strategic decision. It requires answering question such as which capabilities
to be outsourced and why; and whether all capabilities should be outsourced
from a single source. It is the audit committee’s responsibility to choose
correctly the capabilities to be outsourced and those to be kept in-house. The
audit committee should select the outsourcing service providers and get engaged
with them throughout the audit process. For example, the audit committee should
discuss with the service provider the audit methodology and the draft report.
The chairman of the audit committee should receive the final report directly. <o:p></o:p></span></div>
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<span lang="EN-US">The management has an inherent temptation
to filter audit reports before submitting those to the audit committee. This is
a possibility of which the audit committee should always be alert regardless of
the level of trust it share with the management.<o:p></o:p></span></div>
</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-71314266851893127672016-07-06T23:20:00.001-07:002016-07-06T23:20:18.565-07:00Audit Committee Has to Exercise Its Power Effectively<div dir="ltr" style="text-align: left;" trbidi="on">
<h1>
<span lang="EN-US">AUDIT COMMITTEE HAS TO EXERCISE ITS POWER EFFECTIVELY</span></h1>
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<span lang="EN-US">On the backdrop of Satyam scam, the Companies
Act 2013 has introduced new rules to improve audit quality and to punish
auditors who will be found guilty of negligence or connivance with management
in acts of omission and commission by the company. Will those be effective?<o:p></o:p></span></div>
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<span lang="EN-US">We often hear statements like the one that
unethical management, with the support from unethical auditors, distorts
financial information to mislead investors and other stakeholders. Those
statements imply that auditors are corrupt and audit quality will improve only
if auditors are penalised heavily, for example with jail terms, for audit
errors. I am sure that those who deal with the auditing profession do not
believe that the profession is full of corrupt individuals. There are black
sheep in every profession and auditing profession is not an exception. But most
auditing errors are ‘genuine errors’ and not fraud. Those are errors of
judgement. <o:p></o:p></span></div>
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<span lang="EN-US">Errors of judgement arise often due to
common cognitive bias similar to ‘self-serving bias’. Research and experiments
in psychology have established that one unconsciously reaches conclusions that
he/she desires or that serve him/her better. Therefore, when more than one
interpretations of a law or situation or information is possible, one takes the
interpretation that is favourable to him/her believing that he/she interprets
correctly and objectively. Accounting presents number of situations when accounting
principles and methods, applicable laws and regulations and information and
evidence can be interpreted differently. Accounting ambiguity is evident by the
fact that auditors negotiate with clients on accounting policy, methods of
arriving at accounting estimates and accounting estimates. In this ambiguity,
the bias comes into play. If the auditor believes that conclusions that favour
the client favour him/her, he/she will unconsciously interpret laws and
information in a manner that favours the client. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">For business reasons, auditors have strong
motivation to approve client’s financial statements, as an unfavourable report
might lead to losing the client. The Companies Act stipulates that the auditor
has to be appointed for a term of five years and he/she can be removed only by
passing a special resolution in shareholders’ meeting and with the approval of
the government. This has reduced the risk of losing the client and thus, has
reduced the motivation to approve client’s financial statements.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Audit partners act as an agent of the firm
in securing non-audit business from the client and therefore, there is
motivation to appease the client. Companies Act 2013 by prohibiting the auditor
from rendering specified non-audit services has eliminated one of the reasons
for the auditor to remain in client’s good grace. <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Companies Act 2013 requires listed
companies and some other classes of companies to rotate the auditor effective
from the financial year 2017-18. An individual cannot be appointed as an
auditor for longer than a consecutive period of five years and an audit firm
cannot be appointed for a period longer than a consecutive period of ten years.
The cooling off period is five years, after which the individual or the firm can
be reappointed as auditor. This has reduced the risk of familiarity bias, which
arises from the inherent tendency of not hurting those who are known and impairs
objectivity.<o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN-US">Above rules could not eliminate all the
reasons that make the auditor believe that what favours client favours him/her.
<span style="mso-spacerun: yes;"> </span>For example, maintaining good
relationship with the management might help in securing higher than reasonable
fees, swapping audit with a friendly firm, as management will lend credence to
the suggestion of the outgoing auditor, who could maintain good relationship,
and reappointment after the cooling off period. In order to protect auditor’s
independence from the management, the law has transferred the power to
recommend appointment and remuneration of the auditor from the management to
the audit committee and requires the audit committee to discuss audit with the
auditor before the commencement of the audit, during the audit and at the end
of the audit.<o:p></o:p></span></div>
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<span lang="EN-US">In practice, the audit committee does not
exercise the power effectively. It approves management’s proposals for the
appointment and remuneration of auditors as a routine and does not spend
sufficient time in discussing audit with the auditor. There could be many
reasons for the audit committee’s passive approach. For example, it is because the
audit committee is not independent, as independent directors hold the position
at the pleasure of the management; or the audit committee members are not
conscious about the impact of their passive approach on audit independence. <o:p></o:p></span></div>
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<span lang="EN-US">Whatever might be the reasons, audit
committee’s passive approach would significantly dilute the effectiveness of
other audit reforms introduced by the Companies Act 2013. <o:p></o:p></span></div>
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Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com3tag:blogger.com,1999:blog-4122992485611466008.post-176622855042450132016-05-08T18:43:00.002-07:002016-05-08T18:43:39.226-07:00Onus on Board to ensure adequacy of internal controls<div dir="ltr" style="text-align: left;" trbidi="on">
My <a href="http://www.business-standard.com/article/opinion/onus-on-boards-to-ensure-adequacy-of-internal-controls-116050800702_1.html">column</a> in today's (May 19, 2016) Business Standards.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-83923352233831601132016-04-10T18:36:00.002-07:002016-04-10T18:36:49.620-07:00A lesson on Corporate Governance in Family Business<div dir="ltr" style="text-align: left;" trbidi="on">
My <a href="http://www.business-standard.com/article/opinion/a-lesson-on-corporate-governance-in-family-business-116041000692_1.html">column</a> in today's (April 11, 2016) Business Standard.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com2tag:blogger.com,1999:blog-4122992485611466008.post-35302167057142708532016-03-13T18:48:00.002-07:002016-03-13T18:48:14.588-07:00Governance, Risk Management and Compliance<div dir="ltr" style="text-align: left;" trbidi="on">
My <a href="http://www.business-standard.com/article/opinion/governance-risk-management-and-compliance-116031300685_1.html">column</a> in today's (March 14, 2016) Business Standard</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-50126163629342447472016-02-17T04:57:00.000-08:002016-02-17T04:57:33.948-08:00Close down JNU - a 'radical' solution suggested by Mr. Chandan Mitra, a BJP M.P.<div dir="ltr" style="text-align: left;" trbidi="on">
Although it is a waste to read the <a href="http://www.ndtv.com/opinion/government-should-take-this-chance-to-shut-down-jnu-1278181?pfrom=home-lateststories">article</a> written by Mr. Chndan Mitra, it reflect the kind of hatred BJP has against JNU.<br />
<br />
Today's (February 17, 2016) incident of hitting Kanhaiya Kumar in the Court also reflects the same sentiment.<br />
<br />
Lawlesness is the result of government's inability to act against vandalism in the name of nationalism or religion. It is unfortunate that the this government has failed to handle JNU crisis sensitively. It has created a mountain of a molehill. Perhaps the sentiment expressed in the article has driven government action.<br />
<br />
Is it the real India? Perhaps not. This is a transitory phase. India is always tolerent and will remain tolerant.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0tag:blogger.com,1999:blog-4122992485611466008.post-71470481145563885932016-02-12T22:02:00.000-08:002016-02-12T22:02:04.645-08:00Intolerance - arrest of JNU student leader<div dir="ltr" style="text-align: left;" trbidi="on">
The <a href="http://www.ndtv.com/cheat-sheet/jnu-student-leader-arrested-8-others-barred-from-academic-activities-10-points-1276923?pfrom=home-lateststories">report </a>in the media about the arrest of the JNU student leader (Knahaiya Kumar) charged with sedition and conspiracy for holding an event in support of Parliament attack convict Afzal Guru, who was hanged in 2013, has deeply disturbed me. I see it as an example of increasing intolerance. Only because students raised slogans, which might be against the State, they cannot be treated like terrorists and cannot be charged with sedition and conspiracy. Democracy thrives in an atmosphere of tolerance. Therefore, when we see examples of intolerance, we get frightened thinking about the future of democracy. I strongly condemn the arrest of the student leader and presence of police in the JNU campus.<br />
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One may argue that I am able to publish this column because the State is tolerant. I agree, but I am questioning the level of tolerance. If the level of tolerance continues to diminish, a day will come when democracy itself will be in danger. I cannot imagine India without strong democracy. </div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-38740868350590113702016-02-08T17:28:00.000-08:002016-02-08T17:28:05.907-08:00Coca Cola - another example of lobbying power of industry<div dir="ltr" style="text-align: left;" trbidi="on">
On February 8, 2016, Hindu Business Line <a href="http://www.thehindubusinessline.com/news/national/a-lost-battle-plachimadas-victims-may-never-get-cokes-compensation/article8206306.ece">reported </a>that on February 1, 2016 President returned the Plachimada Coca Cola Victims Relief and Compensation Claims Special Tribunal Bill 2011, which was unanimously passed by the Kerala Assembly five years ago. Thus, Coca Cola has been spared to pay damage (estimated at Rs 216 crores by an expert committee) to 1,000 Dalit and Adivasi families of Plachimada, a village in Kerala's Palakkad district. The company had to close the bottling plant in 2005 after long agitation by the local community against the hazarduous effect of the company's operation. The operation of the bottling plant resulted in drying of the local wells and contamination of local water resources.<br />
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The government owes an explanation to the society as to why the Coca Cola has been spared from paying damage to the local community for the pain it had inflicted on the it.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com1tag:blogger.com,1999:blog-4122992485611466008.post-59425221811325351932016-02-07T17:22:00.003-08:002016-02-07T17:22:54.442-08:00Making strategic debt restructuring succeed<div dir="ltr" style="text-align: left;" trbidi="on">
My <a href="http://www.business-standard.com/article/opinion/making-strategic-debt-restructuring-succeed-116020700755_1.html">column</a> published in today's (February 8, 2016) Business Standard.</div>
Corporate Governance - CEO Dualityhttp://www.blogger.com/profile/12669723777780024892noreply@blogger.com0