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Volume XIX No. 12/2014 `45/- A Journal of the INSTITUTETimes OF DIRECTORS December 2014 • India Chief Guest The Rt Hon Theresa May MP, Secretary of State for the Home Department, Govt. of UK presenting the Golden Peacock Awards in London. From L to R: Nikhil Sahni, Senior President, Govt. Relationship Management, YES Bank Ltd., The Rt Hon Alok Sharma, Member Parliament for Reading West, House of Commons, UK, Lt Gen J S Ahluwalia, PVSM (Retd.), President, Institute of Directors, India, Rt. Hon. Baroness Verma, Parliamentary Under Secretary of State for Energy & Climate Change, Govt of UK, Rt. Hon. Sir Richard Needham, Chairman, Golden Peacock Global Awards, Chairman Advisory Group, Stern UK and Vice Chair, NEC Europe, The Rt Hon Shailesh Vara MP, Parliamentary Under-Secretary of State, Ministry of Justice, Govt of UK IODRecognitions Achievements & P: 17 Gopichand P Hinduja Roshni Nadar Malhotra Padma Shree Shahnaz Husain Co-Chairman Executive Director & CEO Chairman & MD Hinduja Group of Companies HCL Corporation Shahnaz Husain Group of Companies Chief Guest Hon’ble Mrs Nirmala Sitharaman Union Minister for Commerce and Industry Minister of One-day National Convention on State for Finance and Corporate Affairs Govt. of India Corporate Governance and Sustainability opening the Global Convention at House of Lords, UK & IOD Annual Meet on 20 December 2014, Hotel Ashok, New Delhi This month's Articles 9th International Conference on Corporate Social Responsibility tailored for you NEXT EVENT on 19 - 20 January 2015 at Hotel Taj Lands End, Mumbai (India) Corporate Governance Corporate Fraud, Audit 14th London Global Convention on Corporate Governance & Sustainability *The Rt Hon Lord Swraj Paul & Vigil Mechanism Scan with of Marylebone, PC *Andrew Ratcliffe A Report Smart Phone QR Reader Pg: 5 Pg: 9 Pg: 17 App: R more inside... Building IOD Tomorrow’s www.iodonline.com Institute Of Directors Boards FROM THE EDITOR Business can do better through Corporate Governance Sustainability is not an isolated concept and the responsibility for the same is now being shared by governments and corporate boards on equal footing. Rio+20 has emphasised on sustainable development goals through sustainability which is the process for attaining final goal. Sustainability cannot be limited to tokenism, but it has to be implemented as a comprehensive policy for clear cut priorities. It is no more an option but forms the basic essence of business operations. The need to demystify sustainability is extremely important. One of the easier routes is to organise CSR professionals so that they can persuade boards to achieve sustainability goal. The importance of sustainability approach is important even in financial services and the CFOs should also EDITORIAL BOARD assume leadership role. Six of the most important topics in accountancy are sustainability related. The Lt Gen JS Ahluwalia, PVSM (Retd.) existing system of financial statements is necessary, but not sufficient for sustainable government. To Pradeep Chaturvedi secure our future properly, we must act now. The Boards must develop a risk appetite and deal with risk Manoj K. Raut related issues. The Companies Act 2013 of India has brought around changes to make boards more Ashok Kapur, IAS (Retd.) dynamic and effective. This is also an effort to align the functioning of Indian companies with that of the EDITOR global players by sharing the principles of governance. Indirectly that is also an effort to promote India as a Pradeep Chaturvedi profitable investment destination. SUB EDITOR Many an experts focus on integrated and holistic thinking – endeavouring to see situation as a whole – and Reji Mathew more of a focus upon behaviours. Various contributors stress the importance of boards and their chairs as they try to reconcile and synthesise contending interests, build collective views and determine a MANAGER DESIGN sustainable way forward. The visions and goals that are articulated, the objectives that are set and the Teena Lejo policies that are agreed must meet interests of different stakeholders to engage them and enable a IOD (HEAD OFFICE) company to build mutually beneficial relationships. Formulating strategies, policies and guidelines is one thing. Ensuring that their implementation and/or observance occurs is quite another. Delhi M-56 A, Greater Kailash - II, (Market) As the Government of India is establishing priorities and formulating implementation plans, it is good time New Delhi-110048 to raise issues and articulate requirements. As we are seeking to build overseas businesses the global Tel: 011-41636294, 41636717, 41008704 perspectives on corporate governance highlight the value of establishing core principles that can be Fax: 011-41008705 adapted to suit the requirement of local jurisdiction and ensure consistency across international E-mail: [email protected] Website: www.iodonline.com operations. At the same time it is in the interest of businesses with global reach and/or aspirations that the general direction of travel is reasonable and appropriate. Ensuring that what emerges is practical and REGIONAL OFFICES proportionate, does not distort decision making and does not unnecessarily become onerous may require Mumbai some participation in the process. Silent, muted or blatantly self-serving voices may be ignored. 1092-C Wing Oberoi Garden Estate, Chandivali Andheri – East, IOD's Global Convention on Corporate Governance and Sustainability in London in October 2014 was an Mumbai 400 072 ideal opportunity to identify the leadership approach for effective cooperation and promoting larger Indo- Tel : +91- 22-40238141 / 42 / 43 UK businesses based on moral and ethical business practices. To consolidate further and create Fax : +91-22-67582231 confidence in Indian business community, IOD is organising National Convention on Corporate E-mail: [email protected] Governance and Sustainability on 20 December, 2014 in New Delhi. That will give an opportunity to share Bengaluru # 201, Oakland Apts, Ulsoor Road, the views of international community with a focus to create a win-win situation for Indian and other global Next to Vidyadeep College, corporates Bangalore - 560 042 Board Nos: 080: 25092234 . Fax: 080: 25583490 Pradeep Chaturvedi Email: [email protected] Vice President, IOD STATE CHAPTERS Kerala: (M) 09446488181 Tamil Nadu: (M) 09840295802 Corporate Governance 5 The Rt Hon Lord Swraj Paul of Marylebone, PC SUBSCRIPTION RATES FOR QT India Corporate Fraud, Audit & Vigil Mechanism 9 Life Subscription Rs 6000 Andrew Ratcliffe Annual Subscription Rs 500 Each Issue Rs 45 th 14 London Global Convention 17 Overseas A Report Life Subscription $ 400 Annual Subscription $ 80 CSR in Sanitation - A perspective 33 Published by : Institute of Directors Deepak Balan Printed at Maximum Packers Okhla Phase-1, New Delhi Emerging Role of Company Secretaries in the Boardrooms 35 Rajeev Jain FCS CONTENTS Total Pages - 56 Golden Peacock Awards, Winners - Highlights of Achievements 2014 39 CORPORATE article Governance CORPORATE Governance *The Rt Hon Lord Swraj Paul of Marylebone, PC The election result in India in May has presented an unparalleled homeland. Encouraging expatriate involvement could help ignite the opportunity for India. I am sure the work IOD, India is doing will have the engine of economic growth. endorsement of Prime Minister Narendra Modi, Finance Minister Arun At the same time the Prime Minister has pledged an end to corruption Jaitley and the government team who are all keen to strengthen and an end to the illicit flow of funds which are a disgrace to a proud corporate discipline and reduce corruption. nation. Just last week, the Finance Minister said in a television interview that: We have a mature and very experienced President, having held every “We are for the market economy but with a social conscience.” This is important portfolio; a deeply committed Prime Minister, and a Finance where the Institute of Directors in India can play a very important role in Minister who is widely regarded as highly competent. All of them are providing the leadership and preparing the corporate environment. determined to make India a fairer society, and secure for the nation its The issue of corporate governance is central to any programme or due place in the world. policy that seeks to advance the Indian economy. In this context, it is Their efforts have generated high hopes. For the first time in a long useful to get some perspective because the past helps us to shape the while, these expectations appear to be within reach. future. If these expectations are to be realised, a few basic changes are I would like to remind this audience what corporate governance was like needed. back in the 1980s when I was one of the first NRIs to substantially India now has to simplify the rules and make sure that all inward invest in India. The business community got scared because it exposed investment whether in infrastructure, business, health, education, the fact that they were running public companies like private fiefdoms. research etc conforms to those rules. When it does not, it must be No corporate governance, no shareholders interest, no transparent disallowed. Investment that enriches itself but does little or nothing financial reporting. Corporate abuse was rampant in most of those for society does nothing for India today. companies. It is also time to end the process where every case has to be individually The so-called owners, who had very small shareholdings of their own, considered by the government before approval. This is time consuming felt threatened when this became widely known. They began lobbying and opens the door for local lobbyists to stall proceedings. It also campaigns to keep out the expat community and they largely creates opportunity for corruption. A lot of companies trying to invest succeeded. in India have suffered from this and it has unfortunately given India a By 1991 when the financial crisis meant foreign exchange was running bad name. out, India had no option to but to introduce reforms to attract overseas Yet major opportunities for business are in prospect.