CORPORATE GOVERNANCE: A STEP TO A BETTER TOMORROW
"Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society"
(Sir Adrian Cadbury in 'Global Corporate Governance Forum', World Bank, 2000)
The most important question that comes to our mind is why Corporate Governance?The reasons that drive Corporate Governance implementation or improvements are varied. This decision making may happen after a long period of cost benefit analysis, or may be executed with expedited and immediate implementation. The factors of motivation may include, access to capital, external market pressure, diversifying shareholder interests, issues of resolving in family owned businesses, sustainability or to achieve better operational results. (Practical Guide to Corporate Governance, International Finance Corporation, 2009)
In most of the Asian countries, the real challenge lies ahead for the implementation or design of such Corporate Governance code in wellness, as most of the large companies have a board comprising of family and friend ownership structure. This poses special challenge in attracting investment and insuring the confidence of minority shareholders to invest. Taking this into consideration, there is an elevated importance of governance practices and the confidence of the institutional investors can be earned by enhancing the protection of shareholders’ rights and interests.
Besides, with an increasing rise in the share ownership of Institutional Investors, their importance has increased and they tend to have a fiduciary responsibility, to act in the best interest of the trustee. This has increased the level of activity and interest shown by the institutional investors in the internal governance and relationship with the stakeholders. Corporate Governance maybe used as a tool to help instill investor confidence in distressed markets, currently rising from the financial crisis by improving transparency and accountability. (Mallin, 2006)
How far does Institutional Investor initiated Corporate Governance can bring increase in performance? Whilst the evidence seems to be mixed, yet, in the findings of a survey conducted by McKinsey (2002) found that majority of the Institutional Investors are willing to pay a premium to invest in the companies that practice good corporate governance. This premium amount to 24% for the Asian and Latin American companies, the highest among the other regions of the world. Such good governance includes majority of external directors, stock based compensation, formal director evaluation and transparency in information to shareholders. (Global Investor Opinion Survey, McKinsey & Company, 2002)
The above survey also outlines the fact that Institutional Investors identify Corporate Governance factors to scale the factor of utmost importance in their investment decisions, superseding factors related to capital markets and other broad factors like environment and corruption. This shows the extent to which an external financing through Institutional Investors can be affected by better Corporate Governance practices. Gompers et al. (2003) concluded that firms with stronger corporate governance practices had a higher firm value, higher profits, higher growth in sales and revenue, lower cost of capital and were involved in few corporate acquisitions. Thus, it outlines that good corporate governance helps to realize the value and create a competitive advantage.
MISSION STATEMENT: AN UNDERSTANDING OF THE ENTERPRISE
“As the gift, most blessed, is of clear vision to eyes,
Similar is a well defined mission to an organization’s rise,
It is the path to one’s journey leading to destination,
Never can an organization stay long, if it lacks its mission.”
Every company lives on the objective of earning wealth for its shareholders. And such objective is well defined in the mission statement of the company. For an outsider, mission statement is the line of impact. It is the well outlined deliverable that a shareholder expects from the company. Every mission statement is followed by objectives. These objectives tend to define the ways in which the company aims to achieve its mission. But the question that stands forth is that, if every company is operated to generate profits, and they have similar mission and objectives, then why state such statements at all?
Some say, mission statement is just a marketing tool, to let the audience know that company is well aware of its act. Others say that mission statements are for the employees, a card that they are required to carry with them, to remind themselves of the various objectives that must be achieved so as to achieve the mission of the organization. This is a strategy to develop a tunnel vision among the employees, ensuring their constant endeavor to generate profits for the organization. Hence, a mission statement is more of an internal guideline than being an external statement of marketing.
In all cases, whatever it might deem to achieve, every company bears the responsibility of drafting their mission statement and their objectives for the business. This might be an accord for the corporate governance of the company, but has now become a tradition. And the tradition has been rooted so deep that companies employ various PR agencies to sit with them through various rounds and help them understand what would be their mission statement. A simple outline of an enterprises’ goal has become so complex and confusing that the intent of such statement as a value proposition of the entrepreneur, has been long lost.
Long lost might be the days of glory, but the corporate world still holds the weight of the economy and no matter how many downturns may follow, the world would always support the cause of an Entrepreneur. And thus lives the story of creation, of creativity, of vision and development. So till the time, every company has an eye on its mission statement, there is a belief that there stated is an objective, to which every individual must align their own destiny and their own actions.
