Corporate Governance

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The state of corporate governance
in India
- A Poll
AUDIT COMMITTEE INSTITUTE
KPMG IN INDIA

This poll “The State of Corporate Governance in India: 2008” is an initiative of KPMG in India’s Audit Committee Institute. The poll, conducted between late November 2008 to early January 2009, involved over 90 respondents comprising CEOs, CFOs, independent directors and similar leaders, who were asked about the journey, experience and the outlook for corporate governance in India. The respondents (page 19) are predominantly from private equity firms, financial services and the manufacturing sector. Good corporate governance helps an organization achieve several objectives and some of the more important ones include:

• Developing appropriate strategies that result in the achievement of stakeholder objectives • Attracting, motivating and retaining talent
• Creating a secure and prosperous operating environment and improving operational performance • Managing and mitigating risk and protecting and enhancing the company’s reputation. Some aspects covered in the poll include:

• Corporate governance regulations in India
• Corporate governance concerns in India and role of independent directors and audit committees in addressing these concerns
• Board practices, board oversight of risk management and the importance given to integrity and ethical values
• Practices that are fundamental to improved corporate governance. The results, which are augmented by comment from KPMG in India’s Audit Committee Institute, also provide a useful contribution to the debate on how Indian companies can improve standards of corporate behavior which do justice to the spirit behind the rules.

We would like to thank all the respondents for taking time to participate in the poll. About this poll
Richard Rekhy
Chief Operating Officer and
Head - Advisory
Neville Dumasia
Executive Director and
Head - Governance, Risk and Compliance Services
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Corporate governance regulatory landscape in India

Recent events in India have put the spotlight on corporate governance practices of Indian companies. A key aspect that is being debated in the corridors of India Inc. is whether we need major regulatory changes to improve corporate governance, or whether improved standards of corporate governance could be achieved through adoption of principle-based standards of conduct. India Inc. has generally been proactive in promulgating corporate governance regulations. In doing so, a good balance has been achieved i.e. headway has been made, in terms of helping ensure that regulations are not stifling our entrepreneurial initiatives. From a purely regulatory standpoint, India compares favorably with most other developing and Asian economies as far as its corporate governance rules are concerned*.

What is good corporate governance?
Good corporate governance is characterized by a firm commitment and adoption of ethical practices by an organization across its entire value chain and in all of its dealings with a wide group of stakeholders encompassing employees, customers, vendors, regulators and shareholders (including the minority shareholders), in both good and bad times. To achieve this, certain checks and practices need to be whole-heartedly embraced. Some considerations in this respect are outlined below:

• Codes of conduct and whistle blower policies are important, but more important is how they are communicated and practiced. It is vital for board members and senior management to lead by example • The concept of having independent directors is a good one in theory but more important is the process...
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