With senior managers and promoters of business, facing the fire for accounting and other irregularities, effectiveness, and role of governance in business now stands contested. Governance plays an important part in the role of business leadership. Eventually lack of governance leads to impacting the economy and other stakeholders including employees. Business leaders are responsible for leading, managing, controlling and developing the business in an effective and sustainable manner. The decisions taken at the leadership level have deeper and long-term impact on the survival of the organisations. So there is a need to analyse the elements of governance that the leaders need to imbibe in themselves and inject in the business, to ensure that businesses do not collapse due to governance failure. Recently there have many reports on SVB bank collapse followed by Signature bank and there are few others who are on tenterhooks and struggling to survive. In India we are still operating in a more regulated environment as compared to US, insulating us from such scenarios for the time being. In fact, the governance has been in the DNA of India for more than 7000 years. In the epic of Ramayana written by Valmiki, Lord Rama on meeting with his brother Bharata, inquired about the well-being of Ayodhya. During the discussion, Lord Rama gives lessons on good governance to Bharata. He says having knowledgeable, courageous, strong willed and good quality ministers is critical to good governance. In today’s parlance one can replace the word “ministers” with “top management team”. The focus is on competency and confidentiality and Lord Rama’s advice to Bharara is to not take decisions unilaterally nor involve too many people in decision making. He also says that trade and agriculture must be given importance and good irrigation facilities must be built with no over-dependence on rains. And traders must be given a fear free environment and their grievances must be promptly addressed. Applying this in today’s scenario, organisations today must create robust processes and systems providing self- reliance and also give sufficient freedom/ flexibility to its employees to take decisions within the framework.
Further, in Bhagwad Gita too, Lord Krishna emphasizes on the importance of doing your duty as a leader, being fearless, having self-control and following austerity and uprightness. Lord Krishna stressed on doing the duty without attachment and a leader must set an example by practising what he preaches. This is one area where the governance issues can be apparent when organisations are embroiled in crisis. The top management team of the crisis ridden organisations try to bail themselves out by selling their stake before the news of the crisis gets reported. Also external / audit / credit rating companies fail in their duty to identify the organisations which do not meet the standards. In most of the cases the ratings are degraded or frauds are reported after the event is publicly known, which leads us to question, the effectiveness of role of these external agencies in today’s business environment.
The more specific mention on good governance can be found in Arthashastra by Kautilya, who links it to stability and makes the Kings responsible, accountable and replaceable. According to Arthashastra, the King is required to protect (Raksha), grow his kingdom (Vriddhi), comply with law and sustain (Palana) and provide social security (Yogakshema). If we consider the CEO of the business as a King, and subjects of the kingdom as the stakeholders then the good governance would mean that the resources are to be applied for the benefit of all the stake holders and not for personal benefit. Arthashastra also refers to the self-discipline of the King and an assertion that a King can reign only with the help of others as one wheel cannot move a chariot. So here again the focus is on having the right advisors to run the organisation and also ensure that public good should be ahead of private benefit.
Based on the above, my conclusion is that each person and organisation in the eco-system must take their responsibilities seriously and do their job honestly in order to ensure good governance. In order to achieve this, organisations will need right kind of well-qualified, knowledgeable people with integrity and good value systems. And that’s what the global education system must aim to achieve and focus on, to shape the future generations. EMBA program for working executives has been designed to also cover this perspective and hence it would provide great benefit to the companies to nominate employees, for such a programme being offered at SRM-AP, University.
Contributed By CA. Dr. Mahalakshmi MudliarAssociate Professor, SRM- University-AP
Views expressed are personal.
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