Q.1 (a) What do you understand by ‘moral integrity’ and ‘professional efficiency’ in the context of corporate governance in India? Illustrate with suitable examples. (10m) Theory
Corporate governance comprises the collection of procedures, traditions, regulations, legislation, and establishments that influence how a corporation (or company) is supervised, managed, and overseen. “Moral integrity” and “Professional efficiency” are two critical principles that guide the behaviour and practices of individuals and organisations.
Moral Integrity in context of Corporate Governance in India:
Moral integrity refers to an individual’s or an organisation’s adherence to a set of ethical principles, values, and standards. It involves doing what is right, just, and fair, even when no one is watching. It implies that individuals and organisations should act with honesty, transparency, and fairness. It includes
- Ethical Conduct of all Corporate leaders, board members, and employees.
- Transparency in financial reporting, auditing and operations of the company and being transparent to the company’s stakeholders.
- Accountability and responsibility of Individuals and organisations for both successes and failures of the company.
- Companies must comply with laws and regulations. This includes labour laws, environmental regulations, and SEBI guidelines.
- Examples: Chanda Kochhar (Ex-ICICI Bank CEO) Case serves as a case of Lack of moral integrity and professional efficiency leading to financial losses due to nepotism. Similarly, the recent case of Adani Enterprises (Hindenberg Report), recent Mass Layoffs by companies during recession, Using employees as a means (Zomato, Swiggy delivery agents) are examples of Lack of corporate governance in India.
Professional Efficiency in context of Corporate Governance in India:
Professional efficiency refers to the ability of workers and organisations to work in an effective and productive manner to achieve their Company’s goals and objectives and bring out more quality with lesser use of resources. It encompasses skills, competence, and the capacity to achieve goals and objectives.It includes:
- Having the Competency to effectively manage the company’s operations and work force. This includes financial management, strategic planning and better resource allocation.
- Sound decision-making that benefits the company and its stakeholders.
- Efficient resource utilisation such as capital, labour, and technology.
- Examples: Tata Group and HDFC are one of the best examples of corporate governance excellence in India. Their board of company members represents a mix of company members and Field professionals leading to efficient decision making in the company.
Gandhiji’s one of the 7 sins “Commerce without Morality” also focuses on this. Thus ‘moral integrity’ and ‘professional efficiency’ must be promoted in Corporate Governance in India. Framing a Code of Corporate Governance and Kotak Committees’s recommendations can be a good way forward.
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