10 January 2015

Corporate Governance & Value Creation

MD, L&T Finance Holding
During his inaugural address, Y. M. Deosthalee (MD, L&T Finance Holding) informed that Governance is much discussed & talked about in various forums, appreciated by investor community but still things go wrong in corporate sector year after year. He felt that investor community must understand the basics as they are the main stake holders of the company.

Although the issues have been adequately addressed in the legislature by company Law and watch-dog institutions like SEBI, at the end of the day it is the character of those who manage is important. Professionally managed company like L&T had the Corporate Governance in place even much before the legislature was in acted. The reason for the same is honesty & integrity of the management & accountability towards the stake holders. He emphasized that it the culture of the management team that delivers the Corporate governance & generally this is observed in the mindsets of the people who govern. Simply put, this character is required in their genes of the promoters in the corporate seat.
Governance is the internal system which should be transparent regarding directing the organization & should be portrayed as such for the outside world.

Value creation is for the stakeholders like Share holders, employees, vendors, service providers & in general for society at large. Long term value creation is quality of product and services and how problems are dealt with on long term basis.
YMD enumerated a few pertinent processes which govern & has potential for value creation. They are Quality & culture of the Board of directors, Long & short term strategy, Involvement of the board in Governance issues, Process of risk management in the company, Disclosures, Internal & external audit findings and the action taken reports, share holder’s roles and rights, & transparent Accountability of professionals for owning the process.

YMD concluded by saying that Mindset of ethical governance & commitment to social responsibility are basics for good governance if you require value creation for all stake holders over long life of the organization.