I don’t think economic transformation will be easy to implement
Narayana Murthy speaks on Corporate Governance in Indian Banks at SpeakIn Expert Talk
SpeakIn and Indian Banks Association (IBA) in partnership with Capgemini, invited Infosys founder N.R. Narayana Murthy to a discourse on Corporate Governance in Indian Banks. The virtual event was attended by Sunil Mehta (Chief Executive of Indian Banks Association), Rajkiran Rai G (Chairman of IBA and MD & CEO of Union Bank of India), Vishal Dixit (Managing Director of Capgemini Financial Services), and Deepshikha Kumar (Founder of SpeakIn).
Speaking about the session where some of country's senior most bankers participated, Deepshikha Kumar commented, "It is a matter of great prestige for SpeakIn to organize such a high level discussion on Corporate Governance featuring Shri Narayana Murthyji. This is an exceptional forum where the custodians of India's wealth have gathered together to discover new principles that will go a long way in improving the quality of corporate governance in their respective banks. SpeakIn is proud to have brought altogether an extremely important perspective for the Indian banks through this session with Mr. Murthy."
The session begun with the introductory note of Mr Sunil Mehta, he applauded the role of N R Narayana Murthy in showcasing India Inc’s strength on global business fronts. He said, “N R Narayana Murthy’s prominence is much echoed and vibrated in not just Indian industry but equally by the International business community. He is a man of distinct vision, fountain of illuminating ideas and an idol of knowledge, value system and inspiration to all of us.”
During his address, Mr Narayana Murthy emphasises upon the need to change the culture of the country. In a conversation with Deepshikha Kumar, he said, Unless there is a cultural transformation in India, I don’t think economic transformation will be easy to implement. The culture of a nation determines how its public institutions develop, sustain and operate. Countries like India, who were under the control of foreign invaders for almost 1000 years, lost the sense of commitment to society. This was because Indians thought that the society, or what was public, belonged to somebody who was either in Europe, or Uzbekistan or Afghanistan. Therefore, Indians focused on making their families strong and blundering commons that Indians considered as belonging to these invaders. This mindset developed over 1000 years and will take a long time to change. Therefore, wealth belonging to a corporate or deposits in a bank has been considered as a perfect gain for plundering by the rich and powerful.
He added, The problem of poor corporate governance steps from this mindset. The deficits in corporate governance in India stem from the primary problem of increasing agency cost and related transactions that benefit the owner managers and the professional management. This problem translates to using public resources illegally to make oneself richer. This problem will be reduced when there is a cultural transformation in India. When using public money for personal benefits will be punished heavily and when the society ostracises such offenders very severely.
Ms Deepshika further asked; how organizations can get alignment of all stakeholders in building awareness, implementation and measuring the effectiveness of corporate governance and what rules should they deploy to measure corporate governance. To which, Mr Murthy responded, “First of all, the best way to eliminate such deficits or reduce the number of such deficits is for a board member to ask if such an action would enhance respect for him or her in the eyes of the society. We have to accept that respect is more important than wealth and power. Second, the board members must be made to realise that they serve to enhance the interest of every shareholder and stakeholder.”
Expressing his views on the topic, Mr Rajkiran Rai said, “When you talk of corporate governance, primarily, we are referring to the code and conduct of decision-makers of a company. It is about setups, systems, processes and principles, which ensure that a company is governed in the best interest of all stakeholders. It is about promoting fairness, transparency and accountability. It is about commitment to values, ethical business conduct and about making a distinction between personal and corporate funds in the management of a company. While these aspects are known to every management firm, very few have been practicing it in letter and spirit.”
While throwing light on corporate governance in the country's financial sector, Vishal Dixit highlighted, “Last 20 years of corporate governance in banking have changed drastically. Some names that come to mind are Lehman brothers, Enron and if you look closer to home, then Satyam. This triggered actions and various committees were set up to institutionalise corporate governance and transparency framework in various parts of the world. Strong policies on corporate governance of banks are essential and critical because the size and complexity of financial institutions are growing day by day and if not checked, they may lead to financial instability.”