Corporate Governance and Capital Markets - PowerPoint PPT Presentation


PPT – Corporate Governance and Capital Markets PowerPoint presentation | free to download - id: 3d0dfb-MWJhY


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation

Corporate Governance and Capital Markets


Corporate Governance and Capital Markets T. V. Mohandas Pai Member of the Board and CFO Infosys Technologies Limited Corporate Governance and Capital Markets What ... – PowerPoint PPT presentation

Number of Views:41
Avg rating:3.0/5.0
Slides: 13
Provided by: nfcgind
Learn more at:


Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Corporate Governance and Capital Markets

Corporate Governance and Capital Markets
  • T. V. Mohandas Pai
  • Member of the Board and CFO
  • Infosys Technologies Limited

Corporate Governance and Capital Markets
Source A McKinsey Survey of Global Investors
What went wrong in the recent past?
  • Environment
  • Loss of moral fibre of corporations
  • Business environment characterized by need to
    compete with the new economy
  • Boards
  • Fundamental weaknesses in business models sought
    to be compensated by adoption of aggressive
    accounting practices
  • Ignored ethics and value systems when a much
    hyped business strategy failed to deliver as
    expected and articulated to Wall Street
  • Incompetence of board members and overriding of
    audit committees
  • Managements
  • Stock option heavy compensation structures
  • Bonus linked to short-term revenue growth, EPS
    and stock price
  • An inability to accept failure
  • Excessive focus on beating the street

What went wrong in the recent past ?
  • Auditors
  • Aggressive interpretation of accounting standards
  • Independence compromised to obtain lucrative
    consulting assignments
  • Employees
  • Compensation linked to stock-price movement
  • Large disparity between the highest and lowest
    paid employee
  • Culture of greed promoted within the organization
    by management
  • Manipulative accounting practices
  • Analysts
  • Ever-greening of reports with an eye on
    investment banking assignments
  • Pressurized managements to beat quarterly
  • Investors
  • Short term focus of investors

Global Reactions
  • Regulatory reactions
  • SOX
  • Clause 49 of listing agreement in India
  • Corporate reactions
  • Focus on fundamentals of business models
  • Focus on strengthening internal controls and
    information systems
  • Stock options
  • Enhanced disclosures in MDA and Annual Reports
  • Guidance
  • Focus on critical accounting policies
  • Aggressive journalism
  • Accounting/Governance was the main story for
  • Glorification of the whistleblower
  • Time Magazines Person of the Year

Key Themes of Current Reforms
  • Independent directors and audit committees have
    enlarged responsibilities
  • Stricter independence standards for audit
  • Enhanced role of the whistle blower
  • Board effectiveness and integrity targeted by
    regulators, politicians and the media
  • Compensation structures are under attack
  • New level of discipline brought to SEC reporting
    and under Clause 49
  • CEO/CFO certifications
  • Improvement in processes as effectiveness of
    internal controls need to be certified
  • Improved processes and controls have connected
    the board to the day to day functioning of the
  • Real time disclosure and shortened deadlines
  • Auditor independence
  • Repeal of self regulation for the auditing
  • Analyzing the analysts

Corporate Governance and Capital Markets
  • Investment is an act of faith
  • Poor governance
  • Undermines integrity of corporations and
    discourages the use of public markets as a means
    to intermediate savings
  • Particularly the areas of transparency and
    disclosure have been a major factor behind
    instability in the financial markets across the
  • Good corporate governance
  • Essential pre-requisite for the integrity and
    credibility of capital market players
  • Contributes to the development of a vibrant
    economy and robust capital markets
  • Recent events have repeatedly proven the
    importance of corporate governance standards,
    including the collapse of large global

What is the Current Status on Corporate
Governance Practices?
  • Insistence on forms and structures
  • Overarching regulations and regulatory overkill
  • Inadequate number of strong independent directors
  • Large liabilities for corporations and officers
  • Has the pendulum swung too far?
  • For the first time in the decade-long history of
    the Index of Economic Freedom, the United States
    is no longer among the Top 10 Most Free
  • Wall Street Journal and the Heritage Foundation
    Index of Economic Freedom
  • India is not even in the list of Top 10

What is the Current Status on Corporate
Governance Practices?
Greater emphasis on leadership by example
  • Boards are returning to basic value systems
  • Each culture should look back to its roots for
    value systems
  • Indias centuries old principles of Dharma

Strengthening the moral fiber of the
Value systems are helping build corporate
governance framework for companies
  • Boards are redefining value creation
  • Not merely increase in stock prices

Strengthening capital markets through corporate
  • Improving the tone at the top
  • Code of ethics - Not an annual
    about and demonstrate the company's ethical
    standards again and again
  • Get colleagues, business heads to speak about
    core values
  • Make ethics part of the companys DNA
  • When someone does commit an ethical violation, a
    company should move to fix the problem and remedy
    the harm as quickly as possible.
  • It also has to take appropriate action against
    the offending employee - swiftly and firmly, even
    if the offending employee is a star performer
  • Hold all of your managers accountable for setting
    the right tone.
  • That means disciplining or even firing them when
    they have failed to create a culture of
  • CXOs themselves have to comply with the letter
    and the spirit of the rules

Strengthening capital markets through corporate
  • Make character a part of the set of key hiring
  • Make integrity, ethics and compliance part of the
    promotion, compensation and evaluation processes
    as well
  • Listen to employees including the bad news
  • Deliver the message of integrity, honesty and
    truthfulness to those with whom you do business
  • Make it clear that you won't tolerate compliance
    risks - even if that means losing a lucrative
    piece of business or a client or a transaction

Thank You