As the Prime Minister Narendra Modi once remarked, “People’s participation is the essence of good governance”. Irrespective of the fact that, whether it is a corporate or a country, people will bestow their unflinching trust on an entity that practices good governance by taking care of its people, that welcomes their active participation and always adhere to a standardised set of rules, policies, and laws to operate and are regulated or organised by a trusted authority. Honesty and transparency always reigns supreme as is evident from Mervyn King, Chairman, King Report’s comment; from a corporation’s perspective, “Good corporate governance is about ‘intellectual honesty’ and not just sticking to rules and regulations, capital flowed towards companies that practiced this type of good governance.”
Talking of corporate governance, there are ample examples which proves that good, effective and honest governance has the potential to add competitive leverage to organisations that practices it, setting them apart from their competitors. The management’s interest must bear allegiance with the interests of the company’s stakeholders and its Board of Directors. We have seen how companies such as Satyam Computers, IL&FS and Punjab National Bank perished due to weak governance that eventually led to dwindling shareholder value in the long term.
Therefore, it would not be incorrect to state that, a good corporate governance system, ensures that the company’s management considers the best interests of all its stakeholders, assists the business in delivering long-term corporate success and economic growth, maintains investor confidence, has a positive impact on share prices by building trust, guides the management on the goals strategy of the company, cuts back on wastages, corruption, risks, maladministration, and make businesses more resilient amidst trying times via reinforcing a robust brand reputation.
Having said that, for any public listed company, the independent board of directors are at the very helm of the company’s corporate governance milieu. Over the years, their roles have become so pivotal in ensuring good governance that now they are absolutely indispensable. Majority of reforms over the last few years have been largely targeted towards empowering these individuals so that they can ensure the highest standards in governance. They are truly the torchbearers of any responsible corporate entity. Their roles and responsibilities typically include realigning corporate credibility and governance standards, operating as an ombudsman, and playing a definitive role in risk management. Independent directors also play critical roles in multiple committees established by organisations to facilitate superlative governance. They are directly responsible for executing observance to corporate governance standards while providing shareholder value over time. Even though independent directors of the board do not have any material or financial connexions with the company, it is their topmost responsibility to guide businesses towards a profitable, socially responsible and environmentally sustainable future.
They not only represents minority shareholders’ interests but are also the vox populi. Independent directors play a central role in monitoring auditors’ work, and overseeing the legal and compliance aspects of the company, so that risk and conflict of interests are mitigated and organisations operate and function seamlessly. Responsible governance will definitely have a positive impact on the company’s long term market capitalisation potential.
Good rural governance
Additionally, any discussion on governance is incomplete if we do not talk about rural governance, because after all, it’s the very prerequisite for an inclusive and sustainable rural transformation. Good rural governance necessitates that citizens realise their human rights, including civil, political, social, cultural and economic rights. These categorically include right to nutrition, right to housing, right to participate and support rural development programmes. Next comes empowerment, especially of the marginalised and vulnerable communities, and lastly, accountability and responsibility of elected politicians and public authorities towards their citizens. Even though the government introduces several reforms to help citizens reap the benefits, more often than not, some of these have glaring implementation gaps. Furthermore, resources are scanty, capacities are inadequate, there are dire lack of skilled staff, and ever shifting political priorities. Such erratic scenarios demand innovative approaches.
Last mile delivery
In today’s world, many experts feel that digitisation can play a huge role in actualising these reforms. Accelerated digitisation offers fresh ways to connect, share and mobilise and these must be linked to social innovations so that the marginal and vulnerable communities reap the benefits. From a service delivery parlance, leaving behind the traditional ways of making consumer connects, there is a need to make inroads in a new way which could be effective and efficient even for illiterates or those who do not yet have affordable access to the requisite technology. Going that last mile should be the utmost priority.
Therefore, in today’s volatile environment, robust governance mechanisms cannot only augment the trust factor, enhance sustainability, but also ensure a participatory, consensus-oriented, answerable, transparent, receptive, effective and efficient, impartial and inclusive environment that abides by the rule of law.
(Dr. Samir Kapur is a visiting faculty to various leading management institutes. He teaches consumer behaviour and marketing management. Views expressed in the article are author’s own.)
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