The Confederation of Indian Industry (CII) has defined its Theme for 2021-22 as ‘Building India for a New World: Competitiveness, Growth, Sustainability, Technology.’
Written by: Chandrajit Banerjee, Director General, CII
For more than a year, the COVID-19 pandemic has disrupted and challenged organizations, lives, and livelihoods across the globe. As countries inch towards stability dealing with successive waves brought on by the pandemic, the imperative ahead for corporates is to maintain a steady pace of growth in the near and long term. While corporations globally have weathered the storm and kept business running, they now need to assume a lead role in India’s future development and take proactive initiatives in getting the growth back.
Globally, leaders predict that for businesses to flourish and bloom over the next decade, they will need to understand the forces that will shape the next 10 years. There is no doubt that ethics; integrity; transparency; sustainability, and societal impact issues will be the leading forces for driving value creation for corporates.
As companies continue to navigate the COVID-19 crisis, they must reconfigure strategy to integrate ethical, environment, social and governance responsibilities of the business. They need to increasingly account for non-financial factors in their long and short-term business plans. Moreover, as companies look to align their value creation plans with the new business landscape, they must optimize performance against current and future material ESG issues to safeguard their companies and ensure long-term success. Ethical behavior, stakeholder management, fulfilling investor expectations for greater board engagement, disclosure and transparency will remain the bedrock of sustainable governance.
In keeping with the need of the times and evolving governance practices globally, CII has defined its theme for 2021-22 as ‘Building India for a New World: Competitiveness, Growth, Sustainability, Technology.’ In fact, CII has been at the forefront of the governance movement in the country. In 1998, the Confederation of Indian Industry (CII) took on a special initiative to launch the “Desirable Corporate Governance: A Code” – the first institutional initiative for the Indian industry. The objective was to develop and promote a Code for Corporate Governance to be adopted and followed by Indian companies, be these in the Private Sector, the Public Sector, Banks, or Financial Institutions—all of which are corporate entities. The CII Code was subsequently incorporated in SEBI’s Kumar Mangalam Birla Committee Report and thereafter in Clause 49 of the Equity Listing Agreement. Furthermore, the CII Code was the first instance where an industry association took the lead in prescribing corporate governance standards for listed companies.
CII also released the ‘CII Corporate Governance Recommendations for Voluntary Adoption’ in 2009 to recommend ways of further improving corporate governance standards and practices both in true letter and spirit. In 2012, the Indian Government constituted an expert committee under the Chairmanship of the then CII President Mr. Adi Godrej, and the “Report of the Committee to formulate a Policy Document on Corporate Governance” prescribed seventeen “Guiding Principles of Corporate Governance”, which formed base for enhancing governance standards in the country. CII continues to work extensively with the Government and Regulators on the corporate governance regulatory framework in the country and actively engaged on amendments to the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations).
In February 2020, CII launched the ‘CII Guidelines on Integrity and Transparency in Governance and Responsible Code of Conduct’ for sustained trust for the industry. These Guidelines attempt to serve as the base for corporates (large and small; listed and unlisted) to redesign their governance strategies citing global practices; existing legal provisions (some of which may currently be applicable only to listed companies); good to have principles; regulatory policy suggestions and forward-looking concepts, encouraging voluntary adherence to the Guidelines. Fifteen recommendations under the Guidelines cover integrity, ethics; citizenship; balancing interest of stakeholders; independent and women directors; easier settlement norms; risk management; succession planning; role of audit committee; enhancing accountability of other third parties who play a fiduciary role; vendor and customer governance; investor activism; start-ups and MSMEs etc.
CII considers ethical practices in business dealings to be critical for the development and growth of the industry in the country. CII believes that one of the first things which a company must prioritize is to be compliant with the laws of the land in true letter and spirit. The organization has been engaging with the Government and regulatory authorities to create a conducive environment towards strengthening corporate governance through sustained dialogue and has been advocating the need for creating a facilitative, streamlined, and harmonized regulatory environment that promotes voluntary adoption of best practices and self-regulation by corporates so that regulation remains facilitative.
I believe that Indian corporate governance standards are comparable to the best in the world, and CII is privileged to be a part of this evolving journey. India is a strong emerging force on the global map. Its growth is enabled by progress and development across sectors by public and private enterprises and is built on the foundation laid down by the government and regulators that encourages transparency in business dealings, accountability, and good governance. As India aspires to its rightful position as a global leader, the focus will be on Corporate India and on Indian markets. Corporate India has a key role in nation building and corporate governance and ethics is an integral part of the broader governance of the country.
This is true especially against the backdrop of the challenging health pandemic and geopolitical environment that has disconcerted the very business continuity of companies. Many companies continue to experience unprecedented vulnerabilities related to lockdowns, health issues of workers, travel restrictions, significant fluctuations in demand and supply chain disruptions. Under these trying circumstances, from building a culture where the company thrives, to redefining the company’s purpose, to investing in retraining talent, to meeting the demands of an evolving business model, and rethinking the company’s people strategy; all are increasingly emerging as critical challenges for the board to sustain and strengthen long-term value creation.
Recommendations
It is important for companies to deliberate on the navigation through unpredictable events such as the spread of COVID-19 and they should continually review rapid action plans by the boards. While boards cannot predict when a crisis may occur; boards that prepare organizations to have the strategic, operational, and financial resilience to recover from any such emerging global / health / climate change / economic issues which challenge the very business continuity, will be better positioned to respond and minimize the risk of financial and business impact.
This year, some of the key issues that emerged as focus areas for the Board include (and in no particular order):
- Broadened perspectives of board responsibility, stewardship, and fiduciary duty;
- Continuity of strong corporate resilience; realignment of strategy and business restructuring; stronger collaboration between the board and management;
- Corporate Digital Responsibility (CDR) and Cyber Security, Frauds and Data privacy;
- ESG has emerged as one of the key governance differentiators in the COVID world. Sustainability and responsibility including reporting on financial and non-financial reporting is rightly catching up globally and India is keeping pace with the recently announced Business Responsibility and Sustainability Reporting for top 1000 listed companies mandated by SEBI; and
- Stakeholder management; strengthening the institution of Directors including Independent Directors; promoting diversity on boards; and re-establishing trust, integrity and ethical leadership continue to remain focal areas for corporates and Boards.
With its strong composure displayed over the last year, corporate India effectively battled the pandemic and has emerged as a resilient player in the global economy. As the pandemic is subdued, India Inc., will once again thread the path of robust growth with ethics and governance as the hallmarks.
About the Expert:
Chandrajit Banerjee (CB) is the Director General of the Confederation of Indian Industry (CII). CII is India’s apex industry organisation, proactively enhancing the competitiveness of Indian Industry. CB has been with the CII for over 33 years and has served as its Director General since 2008. In this post, he is responsible for the overall operations of CII. CB is a Member of a number of important Government Advisory Bodies at the National and State levels. As DG of CII, he is responsible for leading and contributing to many policy level dialogues and discussions to enhance the competitiveness of India Inc and towards the development of India.
