“Swachata” in Corporate Governance

October 02, 2019 is the 150th birth anniversary of Shri Mahatma Gandhi, father of the Nation. The India celebrated his anniversary. It is also the anniversary of another great leader and beloved Ex-Prime Minister the late Shri Lal Bahadur Shastri. The father of the Nation was great propagator of cleanness “Swachhata”.

Recently, we have seen many corporate scams / frauds, which have shaken public confidence in corporate management. Therefore, the need for corporate governance is imperative for reviving investors’ confidence in the corporate sector toward the economic development of society. In short “Swachhata” is required in Corporate Governance.

Today, the society holds greater expectation from the corporate sector in terms of reasonable price, better quality, pollution control, best utilization of resources etc. To meet social expectations, there are many codes of corporate governance for the best management of company in economics and social reforms.

Thus, corporate governance means that company manages its business in a manner that is accountable and responsible to the shareholders. In a wider interpretation corporate governance includes company’s accountability to shareholders and other stakeholders such as employees, suppliers, customers and local community.

As per the Cadbury Committee (U.K.) “Corporate governance is the system by which companies are directed and controlled”.

Thus the corporate governance is more than company administration. It refers to fair efficient, transparent functioning of the corporate management system.

This is possible only when there is “Swachh” mind of top management, who can bring “Swachhata” in corporate governance. The “Swachhata” in the minds of promoter can be instilled if there is no or less greed and feeling for the Nation, That is Nation should be first than personal greed. That should be the motto.

Generally fraud happens when management is not “Swachh”.

To remain non-corrupt and clean i.e. “Swachh” mind set is required because personal greed has no barrier, it could be for many reasons. In the society one would like to show one up than others. Further many times circumstantial situations, where one would like to stand with peers, i.e., competitors.

Therefore, there should be transparency. Transparency means quality of something which enables one to understand the truth easily. In the context of corporate governance, it implies an accurate, adequate and timely disclosure of relevant information about the operating results etc., of the corporate enterprise to the stakeholders.

In fact, transparency is the foundation of corporate governance, which helps to develop a high level of public confidence in the corporate sector. For ensuring transparency in corporate administration a company should publish relevant information about corporate affairs in leading newspapers e.g., on the quarterly, or half yearly or annual basis as per SEBI Regulations.

Equally auditors, both internal and external, also have to remain “Swachh”, by introducing measures and policies designed to compel accountability and transparency in the workplace. Further auditors could promote corporate governance by conducting periodically risk assessment. Auditor may review the security measures that a company has in place against corporate fraud or corruption. External auditors can help to ensure good corporate governance by developing efficient crisis management plans to be used in the event of allegations of fraud or corruption.

H. N. Motiwalla
Editor

— Mahatma Gandhi