"Corporate governance must
go beyond shareholders"
The Hindu,
Business Line, Kolkata, December 29, 2001
CAN there be a convergence of corporate and
public governance? This question reflects the core of a discussion
that is being masterminded by Dr. Madhav Mehra, President of
World Council for Corporate Governance, on a national scale.
Kolkata, on Friday, played host to a seminar
that discussed, as Dr Mehra put it, "the power of collaborative
governance", from where a number of gems rolled out. And
the city's management cognoscenti lapped them up.
Western models of corporate governance,
it was pointed out, were mostly based on maximization of shareholder
value - a theory that was not entirely applicable to the world.
Indeed, employees, whose knowledge accounted for 70 per cent
of corporate assets, must be made part of any governance system,
it was felt.
Governance, in other words, must not focus
merely on shareholders. According to the Centre for Corporate
Governance, it must also consider customers and employees who
commit their lives for the corporation.
"Traditionally speaking, the constitution
of a company's board of directors is confined to its shareholders.
The aim here is to maximise their value," said Dr. Mehra.
In the current knowledge economy, however, such a policy could
lead to a conflict of interest between stakeholders and employees.
A modern corporation, therefore, must create
wealth for all stakeholders, including employees, suppliers
and customers.
Despite all efforts at alleviating poverty,
a large part of the world population was still below the poverty
line, while deprivation and poverty were set to become the greatest
threat to business and industry.
Therefore, business must involve all sections
of stakeholders in working out the right strategies for collaborative
governance.
The events that took place on September 11
in the US had changed the world to the extent that people wanted
a "complete lifting of the veil of secrecy" in their
financial system.
As the Centre put it, there was a lesson
in this for corporate in the context of globalization, the latter
must help bridge the gap between winners and losers.
Dr. Mehra's initiative found endorsement
from Lord Swraj Paul, Chairman of the UK-based Caparo group
of companies. In Lord Paul's words, there was need for transparency
and corporate governance in all aspects of life.
