Corporate governance: no tradeoff between doing well and doing good" Deepak Parekh
16 December 2010
What is corporate governance and how does one make it more effective?
Urging the need to walk the talk, at CII's session on corporate governance, Deepak Parekh, chairman, HDFC Limited, said ''What we need to do is practice governance, rather than just talk about it. There is no tradeoff between doing well and doing good. Nothing happens if you don't practice good governance. There's a need to consider self regulating body over the government appointed ones like SEBI and others.''
Beginning with the role of the CEO, Parekh said, ''The role and expectation from a new age CEO has changed. In today's post crisis world, companies prefer a person with sound strategic thinking rather than aggression - CEO's need to be more cerebral than competitive. The new CEO has also to be aware of the world, as he has to build a diverse global pool of people. Hence, the CEO's need has also changed, as they do not need yes men, but those who question him.''
Highlighting the importance of presentation of details to audit committees, he quoted the examples of banks and said, ''Banks see petty frauds everyday. But one has to report it to the RBI and discuss it with the audit committee. Whenever you write off anything it has to be reported to the audit committee and the regulator.''
Touching upon the provisions proposed under the Companies Bill, Parekh said, ''The government is working to put a limit on the tenure of independent directors to a set number of years. Just when a director is getting used to the working of the company and is most likely to contribute, he has to be changed by rule. The government has to understand that independence is more a matter of mindset, rather than time.''
On determining the compensation of independent directors, he advised a balanced approach. ''It's tricky, but many thoughts are circulating around. One suggestion could be to pay the non-executive director only at the end of his tenure, depending on his performance.''