Corporate governance: three views

Abstract

The fundamental concern of corporate governance is to ensure that the firm’s directors and managers act ethically in the interests of the firm and its shareholders and that the managers are held accountable to capital providers for the use of assets. Corporate governance issues are in general receiving greater attention as a result of the increasing recognition that a firm’s corporate governance affects both its economic performance and its ability to access long-term, low investment capital. However, business schools are sometimes blamed for having neglected corporate governance. We present here a conceptualization of governance from three different perspectives. • J J Irani strongly feels that values are coming back into demand once again. Responding to the apprehensions of critics about playing the game of business according to rules, he comments that being ethical does not mean losing on profits. According to him, it is, in fact, most important to make profits and to generate wealth because only then can one have the resources to do good for the community. What is important is to note that ethics cannot be imposed by law. It has to come through a change of mindset. • In Subir Raha’s opinion, while business has always been conducted for profit, the perception about profit has changed. It is now interpreted as creating value, creating wealth. Managers are required to create wealth ethically with concern not only for the company but also for the community. Corporate social responsibility is the way corporates interact, the way they get involved with people outside. The crucial issue in management is confronting the decisions — good or bad. Corporate governance is about making the right judgment in a given situation even if it involves risks. • Suresh Prabhu attributes all the problems in the country to the deteriorating standards of governance. Governance, in fact, is what we have created — the new functionaries with different responsibilities. If they deliver, governance would be of high order. Unfortunately, however, they do not deliver as the responsibilities and functions have not been codified. Reforming governance would mean overhauling the entire system. And, once public governance gets reformed, corporate governance would automatically improve. Following are the highlights emerging from the discussion: ➢ We need a change in our mindset which will allow us to use the superiority of our intellect to the advantage of corporate India. Training could help in mindset change. ➢ When confronted with the options of doing right or doing wrong, the managers need to test their judgment on their learning or value system in terms of corporate governance by doing the right thing that their training, knowledge, skill, judgment, and conscience tell them to do. The issue is the ability to make a judgment in a given situation and a given time and to confront the question: “Am I doing the right thing for my stakeholders?” ➢ If governance has to ultimately be reformed, the whole country has to change. We must go to the basics of the issue and start solving the problems.