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Transcript of Theme: Lead Corporate India - Role of Company Secretary 37 th National Convention of Company...
Theme: Lead Corporate India - Role of Company Secretary
37th National Convention of Company Secretaries
Board as a Strategic Asset – Company Secretary, The Custodian
Ravi KastiaGroup Executive President & Business Head Aditya Birla Group05th November 2009
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Turbulence in Global Economy
Board of Directors as a Strategic Asset
Company Secretary as a Custodian
Managing Growth in Turbulent Times
Contents
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Prices peaked and collapsed across asset classes
Sub-prime crisis spreads globally
Credit markets seized post Lehman collapse
Distress sale of stressed companies
Unprecedented Government bail-outs
Banks forced to de-leverage
Major developed economies slipped into recession
Unemployment rates increased
Turbulence in Global Economy – 2008
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Unprecedented global monetary and fiscal stimulus
Growth has rebounded in emerging economies
Major economies coming out of recession
Asset prices have rebounded from 2008 low levels
De-leveraging process continued
Significant belt tightening in the first half
Focus on Corporate Governance
Turbulence in Global Economy – 2009
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Where do your Board Stands ?
Source - Deloitte
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Members have requisite experience
Members are placed in appropriate roles
Roles are clearly defined and deliverables understood
There is effective group dynamics
Purposeful dialogue occurs in Board meetings
Independent Directors contribute
Information is shared in time with members
Assessment mechanisms are in place to evaluate effectiveness
Board - A Strategic Asset
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Board as a Strategic Asset plays a role towards ensuring
Management strategy is grounded in reality
Management decisions are well thought out and based on balanced
perspectives
Shareholder and Stakeholder value continues to increase
Robust Corporate Governance structures are in place and
functioning
One individual or faction within the Board cannot steer the Board’s
and the organization’s efforts too far in one direction
Role of Board as a Strategic Asset
The enormous uncertainty in today's environment makes strategic intervention in stakeholder value management all the more important for the
Board
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Role of Company Secretary
Source - ICSI
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As a Custodian, the Company Secretary "protects the value" that the
Board "creates" by –
Ensuring Corporate Compliance
Developing good governance structures
Coordinating the functioning of the Board
Ensuring ethical corporate practices
Facilitating smooth communication between the Board and Management
Providing administrative support to the Board
Role of Company Secretary - The Custodian
Effective functioning of Company Secretary ensures that Board of Directors can focus on important business issues and not on peripheral issues
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An effective Company Secretary:
Ensures good Corporate Governance
Maintains confidentiality, accountability and independence
Ensures fool proof documentation
Safeguards assets and properties of the Company
Optimizes utilization of Board’s expertise and competence
Role of Company Secretary - The Custodian
Behind great corporate progress – there is a strong backbone –the Company Secretary
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Board comprises of Eight independent directors of a total 15.
Institutionalized concept of lead independent director with clear mandate of responsibilities
Robust criteria and framework for selection of independent directors
Clear demarcation of responsibility and authority of the Board
Retirement Policy
Board Compensation Policy
First Company in India to be assigned the highest Corporate Governance Rating (CGR) by ICRA
Case Studies 1 - Infosys
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Transitioned from niche player in low growth low margin Computer
market to Consumer Electronics major
Key Strategy of the Board – Innovation and Sustained Value Creation
Product Innovation -iPod and iPhone
Business Model Innovation – iTunes online music service was
something that had eluded music industry for years
Innovation helped the company to become a player at the centre of a
market 30 times its original market
Apple has comprehensively beaten the current market downturn
Case Studies 2 – Apple Inc.
Source - BCG
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Case Studies Contd….
When the Board fails ??
Board failures will in all likelihood result in the company’s demise
Enron saga: Enron's audit committee reportedly didn’t have the technical knowledge to properly question the auditors on accounting related to the company's special purpose entities.
Radio Corporation of America fiasco:Board judgment on investments into television networks and electronic products turned into heavy money losers, eventually bringing the company to the brink of collapse
Pan American Airlines disaster:Board could not manage the airline market dynamics
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Managing Growth in Turbulent Times
Turbulent Times
4. Rationalize Capex
5. Manage Risk
3. Debt reduction
1. Conserve Cash
2. Cost Optimization
6. Formulate Strategies for Growth
8. Strengthen Corporate Governance
7. Stay Focussed
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Thank you!