Corporate governance at Reliance Communications Limited

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It is evident from the past that, corporations have been condemned to ameliorate their firm's bottom line at any moral or social cost. Ethics fundamentally "refers to the issues of right, wrong, fairness, justice" ( 2010). Firms like Enron, WorldCom, and even Conrad Black made attempt to test the society's view on sound ethical business and also what society sees as a "good" governance practice. These cases do not reflect the entire state of the business environment today. In fact, there are many organizations whose competitive advantages are based in robust corporate governance practices like - stakeholder involvement. Toyota Motor Corporation was facing many problems due to lack of corporate governance few years back which resulted into frustrated investors and slump in Toyota stock prices. Toyota made a right move during that point of time by incorporating good corporate governance. It concentrated on involving the employees and suppliers in the decision making process, bringing in a corporate culture that boost individual creativity, teamwork and honouring mutual trust. These steps helped Toyota to be a leader in global automotive sale, technology and production.

As seen in the example, corporate governance refers to the set of processes, policies, customs, laws and institutions that influences the way a company is managed. It incorporates the objectives for which the company has governed and the relationships among the various shareholders associated. The main stakeholders are the board of directors, the management and the shareholders. While Employees, creditors, suppliers, customers, regulators and the community at large are other stakeholders. Specifically, it relates to a decision making process and executing those decisions in the interest of the stakeholders that essentially aim for the augmentation of corporate performance and assures accountability of management, through various mechanisms, for the benefit of all the stakeholders. Corporate governance is a multi-faceted in nature. The essential features of good corporate governance standards include openness, performance orientation, honesty, mutual respect, trust and integrity, openness, responsibility and accountability and full commitment to the organization. Good corporate governance helps the stakeholders to get a clear understanding of the accountability for the most effective working of any organization.

The Institute of Internal Auditors (IIA) defines governance as "the combination of processes and structures implemented by the board in order to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives."


It is the Good corporate governance that makes sure that the business environment is fair and transparent and the companies can be held liable for all their actions. Contra- wise, bad corporate governance results in mismanagement and corruption. It is essential to keep in mind that although corporate governance has developed as a way to administer modern joint stock corporations but it is fairly significant in state-owned enterprises, cooperatives, and family businesses also. Disregarding the kind of enterprise, it is only good governance that can deliver sustainable good business performance.


The Reliance Group was constituted by Dhirubhai H. Ambani (1932-2002).it is one of the India's largest private sector undertaking, dealing in the businesses of energy and materials value chain. The reliance group's annual revenues are in excess of US$ 44 billion. Reliance Industries Limited, the flagship company, is a Fortune Global 500 company and is the biggest private sector company in India. The most essential element of the evolvement and development of reliance has been the 'backward vertical integration'. In the late seventies, Reliance with regard to textile followed the approach of backward vertical integration - in fibre intermediates, petroleum refining and oil, polyester, plastics, petrochemicals, and gas exploration and production - to be fully merged along the materials and energy value chain. The Reliance Group is associated with a large number of activities like exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones. It reaps the benefit of global leadership in its businesses, being the largest polyester yarn and fibre producer in the whole world and among the top five to ten producers in the world in major petrochemical products. Reliance Industries Limited (encompassing important subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited are the pre-eminent companies of the Reliance group.

After the demise of Dhiru bhai Ambani in the year 2002 nobody anticipated that the heirs of India's largest business organization would get separated. On June 18th, 2005 both the borthers, Mukesh Ambani and Anil Ambani started their own individual realm.


Reliance completely focuses on the proper implementation of finest Corporate Governance practices. At Reliance, Corporate Governance is derived on the following fundamental principles/standards:

Constitution of a Board of Directors of appropriate composition, size, varied expertise and commitment to discharge its responsibilities and duties.

Ensuring timely flow of information to the Board and its Committees to enable them to discharge their functions effectively.

Independent verification and safeguarding integrity of the Company's financial reporting.

A sound system of risk management and internal control.

Timely and balanced disclosure of all material information concerning the Company to all stakeholders.

Transparency and accountability.

Compliance with all the applicable rules and regulations.

Fair and equitable treatment of all its stakeholders including employees, customers, shareholders and investors.

The policy of the company is to retain the optimal composition of both the Executive and Non- Executive Directors. There are 14 directors in the Board out of which 7 are Independent Directors. Classification of the Directors and Structure of the Board are as follows:

Chairman & Managing Director

Mukesh D. Ambani

Executive Directors

Nikhil R. Meswani

Hital R. Meswani

Hardev Singh Kohli

P.M.S. Prasad

R. Ravimohan

Non-Executive Non- Independent Director

Ramniklal H. Ambani

Independent Directors

Mansingh L. Bhakta

Yogendra P. Trivedi

Dr. Dharam Vir Kapur

Mahesh P. Modi

S. Venkitaramanan

Prof. Ashok Misra

Prof. Dipak C. Jain

Dr. Raghunath A. Mashelkar

Reliance Communications Limited

The Reliance Communications Limited always strives to uphold the fundamental standards of corporate governance. The basic principles of corporate governance at Reliance Communications Limited are as follows.

To maintain the highest standards of transparency in all aspects of our interactions and dealings.

To ensure timely dissemination of all price sensitive information and matters of interest to our stakeholders.

To demonstrate the highest level of personal accountability and to ensure that employees consistently pursue excellence in everything they do.

To comply with all the laws, rules and regulations applicable to the Company.

To conduct the affairs of the company in an ethical manner.

To promote the interests of all stakeholders including customers, shareholders, employees, lenders, vendors and the community.

Shri Anil D. Ambani (50), the Chairman

Prof. J. Ramachandran, Director

Shri S. P. Talwar, Director (70)

Shri Deepak Shourie, Director

Shri A. K. Purwar, Director


In Asia, Family owned business groups reign the private sector. They are considered as a valuable and distinctive organization in the world's economy. They consist of parents and children, husband and wife, board members, employees, working partners etc. or a combination of any or all of them.


It can prove as a powerful means to improvise the communication and understanding among members of family. The family values and business history can be used a tool to develop a positive image of the company. But at the same time, Family owned businesses confront an array of challenges which they must handle properly to make the company sustainable in the long run. During the initial, start-up phase of the family business, the company and family relationships are vaguely distinguished. This accounts to various complications in distinguishing company-owned assets, and how company owned assets can be utilized by the family as a shareholder. Current governance-related policies are informal, as a general rule. This can result in confidence on certain key people instead of structures and processes. Such "common" understandings may not be as universally-held or understood when situations change. This could lead to ambiguity on the part of external investors and non-family employees. Weaknesses in governance systems of family businesses are apparent in internal controls, internal audit and risk management. Since majority of the Business are managed by the founders or their children, the control environment is largely tailored to their needs. The problem is that the controls do not evolve along with the company, so the business becomes more complex. This gap is the most important area of consideration by the external investors. Clashes among the siblings who manage the business, misconception between family branches may upset the company's realm and create problems for shareholders. The groups may have different interests and varying degrees of access to company information, which may lead to an atmosphere of distrust in the family. There are situations when some family members want to work for the company, and others want to pursue their own interests, possibly leaving the family business entirely. The Family governance organizations or institutions can play a vital role as an area where delicate issues and problems can be reviewed.


The high standards of corporate governance makes the Reliance globally acknowledged. This particular practice leads to the sustainable growth of the company along with the fulfilment of all the goals and objectives. The intent to meet the aspirations and requirements of the stakeholders is supported by work environment that focuses on performance, all the processes related to governance, high credit ratings and shareholder returns. Corporate social responsibility is also taken care of. Apart from the traditional governance practices it also attempts to adopt and evolve the best practices of corporate governance. Several efforts are taken to maintain its best corporate governance standards. They are as follows:

Proper guidelines have been issued for the board and committee meetings for the effective and efficient process of decision making.

Corporate social responsibility holds an important place. Contributions are made for the social development to the society as a whole.

Strong system is employed for the checks and balances of financial instruments.

A legal compliance unit has been set up so that the company adheres to the legal, statutory and regulatory requirements and standards.

Communication has been made easy so that the shareholders can ask about any question and query.


Mukesh Ambani and Anil Ambani were managing the reliance group after the demise of Dhirubhai Ambani in the year 2002. It was in November 2004, when Mukesh openly accepted in an interview that there are some ownership problems between Anil and him. Anil began to disapprove the practices of corporate governance adopted by Reliance industries, owned by Mukesh.

Due to poor succession planning, the competitive position of family owned businesses like Reliance had significantly weakened over the years.

The failed and unsuccessful succession plans that lead to the alienation of Reliance Industries Limited is an important and widely known case in the world of corporate sector. Proper planning of succession is an important aspect of developing marketing where in the corporate bodies and the corporate governance practises are still cultivating. Reliance being a well established and successful organisation, the chances demolition of shareholder's wealth and corporate value erosion are extremely high. With the death of Dhirubhai the stock performance of the company started going down. More over, the separation's revelation plan of the two brothers was not the correct way to apart the business organisations from a big conglomerate/empire/industry. The various reasons for the deterioration of values can be low cooperation, interconnectedness and low economy of scale and scope.


The basic principles of corporate governance includes

1) Integrity and fairness

2) Transparency and disclosure

3) Accountability and responsibility

Integrity holds a significant place in corporate governance. Ethics and value system are the key elements of integrity. The high management should infuse ethics in the organization which consequently leads to integrity par excellence and fair practices. For this the senior management and the Board of Directors requires a code of conduct, which must be drafted in such a manner that it casts the purpose of the significant and highest principles of integrity. The base of an organization totally depends on the integrity, fair and ethical practises.

Transparency and disclosures are fairly significant in corporate governance. The organization's Board of Directors and the all the committees are presumed to carry out all the activities in a cordial way. Though, the effectiveness relies upon progressive performance of audit committee, good management information system, suitable internal control and other process. An organisation's website, that is nicely-developed and highly interactive helping in giving all the required information related to the business and its administration, is also essential.

Accountability and responsibility would not be an issue for any organization that practises the principles of integrity and disclosures. They will be responsible and accountable to the stakeholders for their actions. The company would have some social responsibility which would be apparent on how they work for it.


The family owned business houses outdo the non family owned business houses in several aspects. In comparison to the non family owned companies, the exclusive selection that gives importance to the risk, growth and control of ownership are the driving power at the rear of distinguishing financial logic.

Family firms are an important source of economic development and growth. These firms create value through product, process, and service innovations that fuel growth and lead to prosperity. The long-term nature of family firms' ownership allows them to dedicate the resources required for innovation and risk taking, thereby fostering entrepreneurship. Furthermore, the kinship-ties that are unique to family firms are believed to have a positive effect upon entrepreneurial opportunity recognition (Barney, Clark, & Alvarez, 2003).

Corporate governance plays a significant role in family owned business with globalisation and ever increasing growth. It is the corporate governance practises that makes can lead to either success or failure. The complexities can be handled by establishing and implementing the appropriate policies. By making the corporate governance an internal part of the family business culture, succession issue is not going to interrupt the working of the organisation.