Corporate Governance – Leading by Example
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FALL 2006 BoardIndiaHIGHLIGHTS OF THE CONFERENCE BOARD’S ACTIVITIES IN INDIA Corporate Governance – Leading by Example “ ound corporate governance is critical to enhance and retain investor trust,” said Kris Gopalakrishnan, President and Board Member, Infosys Technologies, Saddressing The Conference Board’s Council on Corporate Governance & Risk Management – India, at its September meeting. He explained how the company aims to satisfy the spirit – not just the letter – of the law, believing that a company that is “globally respected, transparent, with a culture of innovation should lead by practice of these values.” The Infosys philosophy is that an active, well-informed and independent board is necessary to ensure the highest standards of corporate governance. A majority of board members (eight out of fifteen) are indep endent, and there is clear demarcation of the responsibilities and authority of the chairman, CEO, COO and CFO. The audit committee consists solely of indep endent directors. Mr Gopalakrishnan also described the high level of transparency that characterises the company’s investor relations, and demonstrated how seriously Infosys takes its social responsibilities, through its rural reach and teacher training programmes, for example. This was the Council’s second meeting, and it took place in the Infosys boardroom at its campus in Bangalore. There were discussions on the sensitive issues of boardroom practices, the relationship between the parent and subsidiary companies, ( Continued on page 2 ➢ ) www.conference-board.org 114376_news_boardIndia3.indd4376_news_boardIndia3.indd 1 118/10/068/10/06 111:22:251:22:25 ( Continued from page 1 ➢ ) India’s Boardroom Challenges Interview with Shailesh Haribhakti, Advisor to the Council on Corporate Governance and Risk Management – India. How would you describe the state of corporate governance in India today? Indian corporate governance code is comparable with the best international practices. It has been evolving in parallel with the integration of the Indian economy into the global marketplace. The change that needs to be brought about is in the mindset of the management and the executives at large. Kris Gopalakrishnan, President and Board Member, Infosys Technologies, host of the Council on Corporate Governance What in your view are the chief components of a successful & Risk Management –India, which met in Electronics City, Bangalore on 22 September. board meeting? A well-rounded board composition, structured agenda, availability of and the role of top management in coping with relevant financial, legal and technical data to ease decision-making, multiple risk perceptions in the current business and proper arrangements for effective implementation. environment. Among those attending were CEOs, board directors, CFOs, and Chief Risk Officers Can you illustrate this from your experience as a board member from Grasim Industries, Hindalco, ICICI Bank, of some of the best companies in India? Wipro, TVS Motors, Nagarjuna Group, JSW Group, Yes. Some of the best meetings I have witnessed have focused, for exam- Reliance Industries, State Bank of India, Tata ple, on the future performance of the company in the light of the competi- Consultancy Services, Tata Motors, Tata Steel, tive landscape within which a business operates and the future prospects Scottish & Newcastle, SAP India and Wadia Group. of the industry as a whole. Key new initiatives are taken. Sometimes brief presentations by the chairmen of various committees serve to avoid redundancies and facilitate analysis and decision-making. NYSE Executive Board What are the major challenges facing Indian boardrooms Member Briefs Risk Council at present? I’d say that the preparedness of the executive management with adequate decision support systems is a key challenge. Structures to address issues like succession planning and resources to plan the same also need to be seriously considered. In addition, the board needs to develop a risk management practice and internal assurance code to facilitate appropriate monitoring of the risks and control processes. How can Indian companies benchmark their governance activities against best practice examples in India and elsewhere? Successful benchmarking must entail a detailed exercise to understand international practices on issues such as risk manage- ment, sustainability, performance management, corporate ethics Richard Moore (left) in conversation with Ashok Kumar and succession planning. Corporates could then evolve their own Rout, Chief Operating Officer, Bombay Stock Exchange. governance codes from this benchmarking exercise and review it each year to identify where improvements can be made. In July, the Council on Corporate Governance & Risk Management - India held a lunchtime meeting in Mumbai As advisor to the Council on Corporate Governance and Risk with Richard Moore, Member of the Executive Board of the Management – India, what are the key issues that the Council has New York Stock Exchange, who gave a candid overview of addressed so far and will be focussing on in the next few meetings? the factors that have given rise to the increasing trends So far we have looked mainly at risk management frameworks, in regulation and Sarbanes-Oxley. He outlined the challenges corporate ethics and performance management for the board. faced by the NYSE and US capital markets when dealing with Among the topics to be discussed at future meetings are: subsidiary issues relating to risk-management and board oversight, communications with the parent company; communications with and the need for corporate India to benchmark its governance external board directors; succession planning; and building robust practices as they aspire to become global companies. risk management oversight systems. According to Moore: “It’s when you want to attract larger How would executives benefit from joining this Council? funds – that companies need to separate ownership and The Council provides an opportunity for governance professionals control. Most large investors demand high transparency and to candidly exchange ideas with peers from diverse industry groups. accountability, and the right to be looking at ‘real numbers’. They are able to share experiences and evolve a code of best prac- They want directors on the board who care more about tices for industry and the regulator to implement. shareholder value than about executive compensation”. Richard Moore is also State Treasurer for North Carolina, For more information about The Conference Board Council managing the state’s $61 billion pension fund. programme in India, contact: [email protected] 114376_news_boardIndia3.indd4376_news_boardIndia3.indd 2 118/10/068/10/06 111:22:281:22:28 From left: Ernest Louis, Director - HR, Monsanto India Limited; Yugesh Goutam, From left: T. Hari, Senior Vice President - HR, Satyam Computer Senior Director - HR, Pfizer Limited; Poonam Barua, Regional Director Services Limited; Ira Bindra, Director HR, India Region - GE (General - India, The Conference Board; Mohandas Pai, Board Member & Head of Electric International Operations Company Inc.); R.V. Anand, Vice HR, Infosys Technologies Limited. President - HR, Castrol India Limited; D. Harish, Vice President - HR, Hindustan Lever Limited. Fresh Thinking on HR Issues With India in the process of high corporate transition A special feature of this meeting was the live webcast and global expansion, discussions at the August by Luis Santana, Human Resource Practice Leader, meeting of The Conference Board’s Human The Conference Board Europe, who examined trends Resources Council – India in Goa revolved around the and uncertainties, asking “What will be the future theme of “fresh thinking on HR issues.” Leading the role of HR?” discussions was Mohandas Pai, board member and head of HR at Infosys Technologies. Members also The Council will next meet on 16-17 February 2007. heard from Tata Consultancy Services, GE India, Ford On the agenda: building a cross-cultural workforce; India, Satyam Computers, Monsanto India, and IBM global diversity and corporate cultures; and engaging India on developing a strategic workforce that can employees through the corporate brand. respond to growing demands for talent engagement, succession planning, building leadership, and cross-cultural diversity. A clear consensus emerged from the meeting that Indian HR leaders needed to look beyond their “traditional” role of retention and recruitment for business growth, to a more progressive and inclusive role that focuses on strategic workforce planning and qualitative nurturing of the talent pipeline within the company. Driving this change is the fast-changing business environment and evolution of workplace technology that will be placing a premium on a “dialogue and enquiry” process with other corporate functional heads in the workforce. From left: Yugesh Goutam, Senior Director - HR, Pfizer Limited; This fresh perspective for HR : K. Achuthan, President - HR, Reliance Capital Limited; Bijay Sahoo, • Enables leaders to see across lines of business President & Chief People Officer, Reliance Industries Limited. • Helps to leverage talent within the company • Encourages employees to shop for new jobs and assess their own developmental needs • Prepares career moves within the organisation • Builds on succession planning • Helps HR look for partners in departments such as IT and finance to move the process forward. Such strategic workforce planning creates a vibrant, internal job market that transcends