Governance based on process,structure,people necessary

Regulators may put new norms and guidelines for companies to imbibe corporate governance principles but that may not be enough to bring out the desired result.

Regulators may put new norms and guidelines for companies to imbibe corporate governance principles but that may not be enough to bring out the desired result. A report released by CII-KPMG on Tuesday-Corporate Governance-Value Beyond Compliance said that there needs to be clear separation of ownership,control,and management functions in owner managed companies in India.

The report says that dominance of family owned and managed companies in India poses its own set of challenges as it is tough to segregate the roles of CEO and the chairman of the board. It said that the biggest issue is in demarcating ownership and management in owner-managed companies. With globalisation,companies will have to approach governance challenges holistically and focus will be required on structures,processes and people.

To overcome these challenges,there needs to be clear separation of ownership,control,and management functions. Successful owner-managed companies are those that balance the entrepreneurial approach with the right blend of professionalism and empower professional managers to act decisively, said the report. An important aspect of demarking ownership and management is by ensuring transparent processes to appoint company leaders and develop the leadership gene pool.

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The report also highlights six challenges for corporate governance in India including government interference in PSUs,role of independent directors and investor scrutiny in the companies.

Among the challenges for corporate governance in India the report says that the public sector companies face varying levels of government interference in their routine functioning and that undermines their autonomy. While there are several regulations,their enforcement is weak in India.

Ever since the Satyam Computer scam came to the forefront,the role of independent directors have been under discussion.

The report also says that there is a need to develop a pool of personnel with diverse skill sets who can help build independence and improve corporate functioning.

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While the report highlighted on the need of greater investor scrutiny,CEO succession planning is something that needs to be more actively take up especially in owner-managed businesses.

The report also touched upon the need for scrutiny of the audit profession in India.