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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (11522)	1/10/2003 2:07:54 PM
From: Softechie	Read Replies (1) \| Respond to of 89467

Jim, what's your prediction for unemployment % in 2003-4? I have 7%-8%...a friend has as bad bas 9%-10%...

To: Jim Willie CB who wrote (11522)	1/10/2003 2:11:33 PM
From: stockman_scott	Respond to of 89467

A link to an interesting BP document on global oil reserves...fyi... bp.com

To: Jim Willie CB who wrote (11522)	1/12/2003 3:47:33 AM
From: stockman_scott	Respond to of 89467

Corporate Governance: The Fabled Gospel (7th January 2003) By - Suneet Singh & Manish Sharma capitalideasonline.com The past few months have been the worst of times and the best of times. They have been the worst of times because corporate corruption has struck at the very citadel of capitalism- The USA. They have been the best of times because the past is going to be a harbinger of sound corporate practices with far reaching implications all across the globe more so in India. Corporate governance is a much dreaded word these days. Dreaded because the wave of corporate scandals will cost the US $35 Billion — as much as a $10 barrel rise in the price of oil. Economists at the Brookings Institution, the Washington think tank believe that the corporate scandals will take 34 bps off the GDP. The cost of corruption has been succinctly worded by the renowned investor Mr. Warren Buffett " More money, it has been noted has been stolen with the point of a pen than at the point of a gun". India too has had its share of poor Corporate Governance whereby taxpayers money passed onto companies with fraud managements and owners. What is corporate governance and why is everybody making a hue and cry regarding it? Is it just a modern day fad put to focus by newspapers galore or is it something that hits the common investor like you and me straight below the belt? Many definitions have been put forward regarding CORPORATE GOVERNANCE "Corporate governance represents the value framework, the ethical framework and the moral framework under which business decisions are taken." Mr. N. Vittal (CVC) Corporate governance is at the heart of the drama of liberalisation, because the key issues are those of ownership and control, as well as management integrity, accountability and transparency, and the impact these features have on the growth of the economy and the vitality of the business sector. The essence of CORPORATE GOVERNANCE is captured by the Kumar Mangalam Birla headed committee’s report according to which, " The fundamental objective of corporate governance is the enhancement of share holder value, keeping in view the interest of other stakeholders". The Committee has identified the three key constituents of corporate governance as the Shareholders, the Board of Directors and the Management and has attempted to identify in respect of each of these constituents, their roles and responsibilities as also their rights in the context of good corporate governance. The three key aspects of corporate governance have been recognized as, Accountability, Transparency and Equality of treatment for all stakeholders. Corporate governance therefore calls for three factors: a) Transparency in decision-making b) Accountability which follows from transparency because responsibilities could be fixed easily for actions taken or not taken, and c) The accountability is for the safeguarding the interests of the stakeholders and the investors in the organisation "Strong corporate governance is thus indispensable to resilient and vibrant capital markets and is an important instrument of investor protection. It is the blood that fills the veins of transparent corporate disclosure and high-quality accounting practices. It is the muscle that moves a viable and accessible financial reporting structure" (KB report) In the past few months an unrelenting barrage of newspaper reports have focused on corporate chicanery and greed. Investors are wary of even the top performing companies because mammoths like Enron, WorldCom, Merck, Tyco, Anderson etc. have fallen like a pack of cards. Millions have been wiped off the exchanges Corporate America has not seen such despair and depredation since ages. In such a scenario we have the president of the US of A coming like a knight in shining armour to salvage his markets. The Sarbenes Oxyley act has been put into practice. CEO’s and CFO’s have been made personally liable for the accuracy of the financial statements. With his trademark slogan " God Bless America" the president promises to wipe off corporate corruption and herald corporate integrity. India, also has had its share of Enrons in the forms of MS Shoes, CRB Capital, DSQ Software or a Vikas WSP where shareholders and investors were taken for a ride due to frauds, mismanagement, opaque workings etc. and these are precisely the things which Corporate Governance seeks to eradicate. But is the task so simple? Is adherence to regulatory requirements the soul of Corporate Governance? What about the penalty. These are some of the critical success factors, which need to be addressed for the concept to really increase the stakeholders’ wealth. Undoubtedly regulatory requirements are essential for Corporate Governance. However Corporate Governance transcends balance sheets and income statements. It is an entire philosophy by which the resources of an organisation are channelised to maximise shareholder value keeping in view the interests of the other stakeholders. It begins at the top level and transcends to the lower levels. CORPORATE GOVERNANCE demands some of the following: Culture Designing the right structures for Corporate Governance is important but instilling the right culture is essential. It is very important that the Board of Directors consist of independent members. These should be individuals with varied experiences so they bring a multi-dimensional perspective to the problems of an organisation. The primary task of the Board should be to ensure that all energies are directed towards shareholder value creation. Regulatory Framework Unfettered capitalism warrants absolute accountability and transparency. There have to be systems in place that ensure adequate disclosures. In the Indian scenario many positive steps have been taken in this direction. Most of the companies have set up an Audit Committee, a Remuneration Committee etc. The Board of Directors are being restructured to include Independent directors. Segment reporting, highlighting the effect of deferred taxation and consolidation of accounts are some of the key areas, which are directed towards more transparency and Accounting Standards to these effects have been put into operation. Indian corporates must realise that foreign portfolio investors have started playing a seminal role in the Indian capital markets. The FIIs pay a premium to transparency and accountability. The market in general views favourably companies that treat the investor as partners in their growth. The best example in the Indian scenario is undoubtedly that of Infosys. The company has been adjudged by Nasdaq as the best value reporter. Infy’s annual reports are the benchmarks of transparency. It is no surprise that Infy is one of the most favoured stocks of the common Indian investor Implementation The management must operate within the boundaries and the policy framework laid down by the board. While the board is responsible for ensuring that the principles of corporate governance are adhered to and enforced, the real onus of implementation lies with the management. It is responsible for translating into action, the policies and strategies of the board and implementing its directives to achieve corporate objectives of the company framed by the Board As Mr. Narayan Murthy. Chairman - Infosys rightly said - "it is all about cultural responsibility, which should be built by the leaders and driven by the people of an organisation. Courage, action and caring are needed for a long innings" To sum it up in the words of the KB report - the best results would be achieved when the companies begin to treat the code not as a mere structure, but as a way of life. (The authors are Information Analysts at McKinsey Knowledge Centre, N Delhi - )