India is an emerging economy. A BRIC superpower which is all poised to propel the Asian economic juggernaut with China into the next decade. As more and more Indian corporate organizations push their geographical boundaries in the quest of a globalised world, what needs to be remembered is that they need to put more emphasis on corporate governance as a concept, to be recognized and respected as global conglomerates within the global business fraternity.

The present thrust on corporate governance is historical in nature and if we take a look at this more closely more often than not we would find that the concept has become widely circulated because of audit failure. It is on this point that I believe we need to reiterate a few points.

What happens when corporate governance and audits fail? How does it affect an organisation? What core values are affected in such circumstances? I will try to identify the few which rank right at the top for me from the perspective of leadership and public perception, a key concern for any global conglomerate.

Legitimacy: To earn and retain social legitimacy, a corporation must define its basic mission in terms of the social purpose it is designed to serve rather than as the maximization of profit. Failure in corporate governance robs an organisation of this legitimacy.

Governance: Any corporation must be thought of, managed, and governed more as a community of stakeholders and less as the property of investors. When audits fail the company ceases to exude that belief and promotes lack of leadership and confidence within the business fraternity.

Equity: A corporation must strive to achieve greater perceived fairness in the distribution of economic wealth and in its treatment of all stakeholder interests. Failure of corporate governance or audits can destroy the equity that an organisation has taken years to build with its stakeholders and investors, within a very short span of time.

Suitable business environment: A corporation must integrate the practices of restorative economics and sustainable development into the mainstream of its business strategy. Failure in corporate governance elicits an unfavorable response about the organizations’ business environment within governments and business partners.

Motivation to sustain employees: A corporation must reflect the values of its workforce and increase both the effectiveness and loyalty of its employees. However, when corporate governance fails, employees themselves loose their loyalty towards their organisation while the organisation fails to motivate its employees.

Public/private –sector relationships: To ascertain smooth power shift, corporations need to work with the government and classify a publicly accepted demarcation of roles and responsibilities of the public and private sectors. Failure to comply to audit guidelines can lead to a breakdown in this relationship which is detrimental to the health of any organization.

Ethics: Complying with the ethics and guidelines, a corporation must raise the bar of its performance. This is the only way to build trust and nurture lasting relationships. With the failure of corporate governance it is this fabric of trust which breaks down.

Disclaimer:

The views shared in this blog are that of the author alone and do not in any way necessarily reflect the same as of IBM

This entry was posted on Wednesday, September 9th, 2009 and is filed under Robert Parker. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.