Prime Minister & Finance Minister Speak on Corporate Governance

India Corporate Week commenced on 14 December 2010 with the theme of “sustainable business.” Political leaders taking part in the sessions are making crucial statements on need for businesses to follow ethical practices. This could be because the ruling party has suffered a severe dent in image due to media reports of recent scams and frauds.

PM Manmohan Singh

 

Prime Minister Manmohan Singh inaugurated the India corporate week. In his opening speech, he requested corporate India to adopt ethical business practices, be role models for corporate governance and build a relationship of trust and transparency.   

“We wish to provide a level playing field for private businesses, free from fear or favor. I am aware of the nervousness in some sections of the corporate sector arising out of the powers conferred upon Governmental authorities to tap phones for protecting national security and preventing tax evasion and money laundering. While these powers are needed in the world that we live in, they have to be exercised with utmost care and under well defined rules, procedures and mechanisms so that they are not misused”

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“Finally, ethical and responsible behavior needs to become the cornerstone of corporate behavior, as indeed our national outlook. Ethics encompass a wide sphere of actions, economic, social and human, involving the consumer, labor, society at large and the government. Mahatma Gandhi repeatedly used to emphasize the importance of not only good ends but also of the use of fair means to attain them. It is the large companies that have to set the pace in this regard. The rest of the corporate sector will quickly follow as this becomes a national norm.

Our Corporate culture must be attuned to the universally accepted values of good governance – accountability, transparency, responsibility and responsiveness to stake holders. Our corporate endeavors have to be consonant with the demands of our eco system and the expectations of Indian democracy. The economic reforms of the last two decades have opened up many new opportunities. But just as over bearing controls stifle initiative; dogmatic adherence to extreme models of non-regulation can also be disruptive to sustainable growth. Ours is the middle path. We believe we must trust Corporate India as indeed you must trust us”.

Yesterday, Finance minister Pranab Mukherjee spoke at Institute of Company Secretaries in Delhi. He reiterated the need for corporate India to adopt good practices of corporate governance and business ethics. Given below is an excerpt of his speech from The Economic Times of India

FM Pranab Mukherjee

“Ethics and governance are the two brakes which should self-activate before an enterprise succumbs to a vicious cycle of ambition, greed and complacency.”

“Companies need to embed good governance as part of their business strategy to achieve their core objectives.”

The finance minister said there were fine examples in India of companies which have followed corporate governance practices long before they were mandated. He said the debate over corporate governance had moved from the effects of bad governance on minority shareholders to the effect on all stakeholders. “A company needs to balance the interests of different stakeholders,” he said. “The current focus on the role of the boards and their independent directors is the result of corporate failure and corporate governance scandals in many parts of the world,” Mukherjee said.

The minister said the subprime crisis in the US took place despite the stringent Sarbanes Oxley Act, which had set improved standards for all US public company boards, managements and public accounting firms. He said the US experience shows it is difficult to legislate against bad corporate decisions unless all the stakeholders are willing partners.

He said the current recession in the western world was triggered by mispricing of risk which led to excessive leverage and high prices of a wide range of assets.

Government and political leaders are finally acknowledging the need to reduce corruption. They are consistently giving the message to build a healthy corporate culture by adopting sound corporate governance practices. Let us see whether these statements are made to salvage their reputations or some real action follows. The heat is on due to the 2G Telecom Scam and release of Niira Radia tapes. If political leaders wish to clean up their images, the people identified in the scams will have to face judicial charges. The government may not be able to turn the tide in its favor by just making the right speeches. Do you think the political leaders will be able to walk the talk?

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7 comments on “Prime Minister & Finance Minister Speak on Corporate Governance

  1. In 2010 we have seen big scams (Commonwealth, Adarsh Housing society, 2G scam and so on). We have been hearing good speaches from the ruling party but no actions. Handing over 2G scam probe to JPC is a good option and the opposition is asking the same since long but no effect. The total loss to our contry is huge due to these scams, You have rightly pointed out that the people found guilty should be punished but this will never happen. The noises being heard will slow down soon and the real culprits will move scot free. Stamp paper scam, only scape goats like Telgi were caught. Now he is no more there all the proceedings for 50K crore scam will be closed. I totally agree with you the political leaders will be able to walk the talk

    • Hi Hardeep,

      Longtime. You could be right. Sonia Gandhi is saying Congress will not be severing ties with DMK. My personal opinion is that Radia tapes were released as a diversion to take the heat of PM, and put it on business leaders. Otherwise congress would have sunk with the number of scams. This is an attempt to show them in better light, like they are doing something and are not against transperancy.

      But I think the public has got wiser, and sustainance on verbal communication and diversion tactics would prove costly for Congress in the next elections. It is already losing grounds in states. So some action will take place. Let us wait and watch.

      Sonia

      • Busy with some assignment. How was your meeting in Bangalore!!!

        We do not have a good opposition. Even congress is loosing hold in states but we do not have any other party with fair image. Anybody who comes in power wants to make most of profit within his tenure.
        Do you think if opposition comes into power these scams will stop? Our judiciary needs to be more stronger and set examples by punishing guilty people.
        Politicians should set examples regarding ethical and responsible behaviour, they should not be just poster babies of political parties.

      • Well, at the moment it is like pot calling the kettle black. Unless leaders start behaving ethically, the society will go to the dogs. So I think the leaders have to decide whether they want a quick buck by wrong means or good earning by right means. Wrong means doesn’t ensure happiness, see Madoff case, whereas right means do give peace of mind.

        So the insatiable appetitte for more power and money has to be restrained by oneself. My father always said that the line for satisfaction has to drawn by oneself and not others. Because there is no end to desire and want. One can drive oneself crazy with wanting more and more.

        Sonia

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