Corporate governance has become a glorified word in the modern context of the moves of globalization, liberalization, privatization and the consequent emphasis on market orientation. It calls for stronger leadership and speedier decisions. New opportunities and enormous risks and uncertainties emerged. The pressing need for immediate success forced change of value base of corporate managers. Hence, window dressing and hiding of facts in reporting and corruptive practices in their behavior came to the forefront; as are witnessed in the form of corporate frauds, large scale misreporting, security scam and many more such corruptive practices.
The consequences of such corruptive practices are to include gross ignorance of share holder's value, increasing distrust among public and irresponsible behavior of the managers without any conclusive fear of punishment. Hence, an awakening for fair functioning of corporate in overall interest of the stakeholders has grown very fast these days. This awakening has in a way stressed the need for good corporate governance and its pertinent aspects like ethics, code of conduct, moral values, social responsibility as also necessary improvements in the legal framework-all converging towards accountability, transparency, equity and competitiveness.
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The ultimate scenario covers the necessity of business ethics and social responsibility to be redefined in consonance with the entrepreneurial ethos which are the prime drivers of all types of activities.
The current paper makes an attempt to discuss some pertinent challenges in the field of successful implementation of corporate governance. Most of the challenges emerge mainly due to the conflicts in the micro and macro entrepreneurial ethos and to ensure effective corporate governance, sincere efforts including public integrity and character building through value education and conducive economic, social and political environment are a must.
Key words: Corporate Governance, Pertinent Challenges, Entrepreneurial Ethos.
"Challenging Issues in Corporate Governance"
Corporate governance has become a glorified word in the modern context of the moves of globalization, liberalization, privatization and the consequent emphasis on market orientation. It calls for stronger leadership and speedier decisions. New opportunities and enormous risks and uncertainties emerged. The pressing need for immediate success forced change of value base of corporate managers. Hence, window dressing and hiding of facts in reporting and corruptive practices in their behavior came to the forefront; as are witnessed in the form of corporate frauds, large scale misreporting, security scams and many more such corruptive practices.
The consequences of such corruptive practices are to include gross ignorance of share holder's value, increasing distrust among the public and irresponsible behavior of the managers without any conclusive fear of punishment. Hence, an awakening for fair functioning of corporate in the overall interests of the stake holders has grown very fast these days. This awakening has in a way stressed the need for good corporate governance and its pertinent aspects like ethics, code of conduct, moral values, social responsibility as also necessary improvements in the legal framework-all converging towards accountability, transparency, equity and competitiveness.
Like good corporate governance in other countries both awareness and efforts for corporate governance have increased in our country too. The onus of responsibility for good corporate governance have been led on the board of directors of corporate sectors and comprehensive guidelines in terms of type of directors, the remuneration, responsibility, etc. as also the requirement of audit committees and supervisory boards have been determined and it is expected through these various statutory and voluntary requirements that Indian corporate sector will come out with good corporate governance.
Corporate governance is broadly projected as a multifaceted as well as multidisciplinary phenomenon. To build up an environment of trust and confidence amongst all the stakeholders, though having competing and conflicting interests, is a celebrated manifesto of corporate governance. It broadly covers a set of rules that are designed to govern the behavior of corporates and it deals with laws, procedures, practices and implicit rules that determine corporate sectors ability to take managerial decisions vis-a-vis stake holders' interest. The entire approach requires transparent and fair behavior in terms of the objectives of the corporate sector, and the package of means to achieve them.
Corporate governance emphasizes governance by the corporate sector. The word 'governance' may be defined as the traditions and institutions that determine how authority is exercised. It includes:
Always on Time
Marked to Standard
The process by which authority is selected, held accountable, monitored and replaced;
The capacity of authority to manage responses efficiently and to formulate, implement and enforce sound policies and regulations;
The respect of stake holders and their interests;
The state of institutions that govern social and economic interactions among them.
The concept emphasizes that nothing illegal or unethical be done; while the principle of enlightened self interest be promoted for it furthers governance. This way it covers the frontiers of ethical issues. In this context ethics refers to the system of moral principles (DO'S and DON'TS) and rules of conduct which are considered self imposed in a particular framework and environment. It emphasizes that the functioning should not be detrimental to the interest of the stake holders.
Despite the fact that corporate governance is an urgent need in the present day context of globalization, privatization and liberalization; and several measures are being identified and are being tried in action, still it remained in practice largely a fanciful move. This has forced the researcher to review the ultimate scenario basically required to convert it in to effective reality.
The basic ultimate scenario covers the necessity of Business Ethics and Social Responsibility to be redefined in consonance with the Entrepreneurial Ethos which are the prime drivers of all types of activities.
Ethics, Values and Social Responsibility:
The word "Ethics" comes from Greek word "ethicos" meaning custom or "accepted behavior" and when one behaves different from it, it is not accepted. The Greek word "ethos" means customs, habit or character and it refers particularly to the spirit of the culture or the disposition. The ethos of culture comes close to what the historians and philosophers call the "values" of a culture.
Oxford Advanced Learner's Dictionary defines the word 'ethics' as "moral principles that govern or influence a person's behavior". Ethics formulization is benchmarking of human behavior. The conduct of mankind is influenced either by the emotions of life or the action people perform in specific situation.
The ethical process involves two steps. First, one must know what is right and what is wrong and second one must have the personal discipline, integrity and motivation to do what they know is right. Society puts in place punishments and penalties to protect the innocent and to motivate those with weak self discipline, low personal integrity or poor judgment to act in accordance with accepted practices. Determining what is right is often challenging, because frequently there is more than one right way to do most things. For this reason it is beneficial to identify a set of guiding principles to help determine what the most "right" decision is.
It is its relevance in groups of human- beings, may be known as social systems and organizations. Hence it relates to all those who are associated with the system. For business organizations in the modern times, it is related to all the stakeholders-investor, customer, employee, supplier, government and community. The relative priorities of the stakeholders define ethics of the system or the organization. These priorities are also known as 'values'.
Values represent the standard or ideals about a person, object, event or activity 'ought to be'. For example we expect that people should be sincere and honest. Parents ought to guide their children and so on. If these ideas or benchmarks are not met by the people, then we use such as 'bad', 'awful' and 'wicked' to describe people or events. Thus values denote a sense of right or wrong, good or bad, and other judgmental criteria based on our strong sense of what the ideal ought to be. Values shape attitudes, perceptions, interests and finally personality.
Value is an acquired trust on certain philosophy, which activates human mind to determine the course of action a person is rendering in his life. Value only leads the mental course and is nothing to do directly with the performance of action. The business is not unethical, it is the individual action which influences the business activities and put the business in unethical situation.
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Values at the individual level include faith, self respect, competitiveness, creativity, devotion. Towards work level it includes tolerance, sacrifice, courtesy, good just, civil sense, honesty, humility, simplicity, reason, truth, forgiveness, fortitude, cleanliness, absence of egoism, detachment, poise, equanimity etc. values that can be imparted to the members of organization collectively include harmony, resourcefulness, discipline, dharma, equity, brotherhood, unity, peace, social conscience, cooperation, live and let live, concern, care, mutual trust, love, team spirit, efficiency, effectiveness, excellence, morale, productivity, responsibility, risk-bearing, accountability, sharing, sacrifice etc.
Individuals acting in a professional capacity take on an additional burden of ethical responsibility. Foe example, professionals associations have codes or ethics that prescribe required behavior within the context of a professional practice such as medicine, law, accounting or engineering. These written codes provide rules of conduct and standards of behavior based on the principles of Professional Ethics, which include:
Openness; full disclosure.
Due diligence/ duty of care.
Fidelity to professional responsibilities.
Avoiding potential or apparent conflict of interest.
Broader principles of moral values (to do or to forebear) are to include:
Do not deceive or cheat
Do not resort to hoarding, black marketing, profiteering and
Do not destroy or distort competition
Ensure sincerity and accuracy
Do not resort to unfair practices
Work as a good citizen
Refrain from secret kickbacks/ corruption
Fair treatment to workers etc.
Even when not written in to a code, principles of professional ethics are usually expected of people in business, employees, volunteers, elected representatives and so on.
For every type of corporate entity, commercial or otherwise, there are individual human beings responsible as entrepreneurs or as leaders, as the case may be. The philosophy of the working of these entities can not be completely different from the attitudes and aspirations of the individuals working as promoters. In other words, the characteristic spirit of these promoter individuals as manifested in their attitudes and aspirations, known as their ethos, occupy a prime place in their actual functioning in terms of various types of decisions and different types of actions. Any effort contradictory to such ethos is bound to remain either as fancy or to meet with gross failure. In this context while talking about the various efforts/measures for corporate governance, it will be in the fitness of the things to examine objectively as to what extent are the measures for corporate governance in consonance with the prominent ethos of the promoters, entrepreneurs and leaders. For, the matching between the two will go a long way in converting the pipedream in to effective reality in action.
By observing the behavior of the promoters, entrepreneurs, and leaders as individuals, the universal attitudes and aspirations in terms of their ethos may be broadly identified as under:
Protection of Self Interest in terms of gain, popularity and recognition.
Quick and speedy progress.
Major thrust for the ends irrespective of the required means.
Adherence to the philosophy of 'I am OK'.
Zero sum game approach
Preference for one's fame or popularity.
Ceaseless efforts to prefer gain to loss.
But these entrepreneurial ethos/values many a time come in conflict when they are separated as micro and macro ones and ultimately weaken the effectiveness of the measures of the corporate governance.
Some reasons for the lack of high standards in corporate governance converge towards the following points:
(a) King's son becomes the next king.
(b) Royal Throne to corporate Throne-same process.
Lack of concern for the society
A good man is different from a good citizen.
We have a lot of "good people" but not "good citizen"
(c) Social concerns are missing.
Highly controlled environment
Incentives for flouting values are quite tempting.
Extremely short term perspective
No tendency for long term vision as against a strong temptation to look for short cuts.
Sick units and healthy promoters.
The aforementioned overview suggests us to accept a fact that unless the conflicts in the micro and macro entrepreneurial ethos are not lessened and the people at the helm of authority do not posses public integrity, the corporate governance in practice shall remain apparent only, far away from the situation of conclusive corporate governance.
But no amount of system can work well when the surrounding atmosphere is not conducive to implement fair norms of behavior and mandatory provisions of legal framework. The surrounding environment in the country is characterized by the following aspects:
Indiscipline and unbridled political behaviors reflecting gross absence of fair behavior.
Prevalence of short cuts for getting undue benefits like Syco-Fancy, profitability, non adherence to moral values, selfish and greedy behavior.
Continuous efforts by the responsible members of the management team to pressurize for providing benefits to a wide range of the unscrupulous to the gross neglect of genuine claimants.
Absence of any fear of getting punishment by practicing all sorts of corruptive actions.
These aspects are only in the form of illustrative issues and many more such type of issues can be thought of.
In the above backdrop certain questions emerge before the author some of the questions are to include the following:
Should we not seriously examine the wisdom of following the currently popular individualized model of glorified CEO and associated obscene compensation and life style protection?
Should leadership qualities be measured by short-term financial performances or by contribution to building socially relevant and operationally efficient people driven organizations?
Is hankering of a modern manager after financial reward and managerial power a symptom of obvious erosion of ethical (honesty and integrity) and social (trust worthy and community sprit) capital in matters of business?
Can good governance be self-sustaining?
Notwithstanding the best management practices can companies be insulated from the prevailing economic, political and social environment?
Can corporate governance create an island of purity in the midst of a cesspool full of political filth and squalor?
Is corporate governance possible in the absence of Government governance?
Too much mandatory provisions, guidelines, norms and their apparent compliance conclusively help ensure good corporate governance? Up to what extent are the provisions, rules and regulations for good corporate governance appropriate and effective?
These questions infect are in the form of a big challenge before the modern management. In other words how does the management function in the polluted environment so that it may succeed in ensuring good corporate governance? Of course legal framework provides mandatory requirements. But their implementation has to be done by the team of managers who are basically human beings living in the social framework. Their behavior cannot be completely insulated against the corruptive practices mentioned earlier. To overcome this challenging hurdle in the opinion of the researcher it is necessary that there has to be public integrity.
Public integrity can not be entrusted, it has to be inculcated and accepted voluntarily. For this it is necessary that value education has to be imparted to them so that their character may become sound and the managers may become more eager to discharge their activities fairly well. Value education to the society as a whole will also go a long way to make the surrounding atmosphere more ameliorative and friendly and thus the challenge can be easily met with fair amount of success.
To conclude, it may be said that corporate governance is the need of the day. Though it existed in the past in the form of enlightened concept of social responsibility of business and their after the concept of social audit. It has become more prominent recently due to speedier integration of different nations at a global level. However its success inter-alia, requires wide spread impact of ethical and value education which will help a long way in making the environment more conducive and in enabling the modern management to meet the challenge more successfully.