'No Holy Cows in India Inc when it comes to corporate governance'

M Damodaran, former chairman of the Securities and Exchange Board of India

Ever since the infamous Satyam scam of 2009, India Inc has had many serious run-ins with issues relating to corporate governance. And such issues continue to make headlines, as the boardroom battle at India’s most trusted and respected conglomerate, the Tata Group, continues to simmer.

Interestingly, M Damodaran, former chairman of the Securities and Exchange Board of India (SEBI), is of the opinion that there never were any “Holy Cows” in India [India Inc] when it came to corporate governance.

During his chairmanship at SEBI (from 2005 to 2008), he had ushered in a slew of corporate governance reforms. In the recent past, he has setup the Non-Executive Directors in Conversation Trust, which aims to address issues and challenges faced by non-executive directors in light of the Companies Act giving more responsibilities to them.

The best explanation for corporate governance according to Damodaran, is when you marry two sentences that Mahatma Gandhi spoke to two different audiences at two different points in time. “First, Gandhiji said, ‘Business is trust, business stands for trust.’ To another audience he said, ‘The ends do not justify the means’,” Damodaran said to a power-packed audience comprising of India's top industrialists at the sixth Forbes India Leadership Awards 2016, which was held in Mumbai on November 8.

“There are two major evil influences in our lives and I call these the terrible twins — conflict of interest and asymmetry of information. If you can fix both of these or at least reduce the impact that both of these have in your working environment, clearly you have traveled a long way towards what I understand of corporate governance,” said the 69-year-old, who as was instrumental in scripting the turnaround of Unit Trust of India, after being appointed as the company chairman in 2001.

“If you treat all stakeholders [of a company] with justice and fairness, then I think you have answered the question on corporate governance,” he added.

Damodaran emphasised that communication — in a clear, concise, correct and clean manner — by a manager, chief executive, promoter or board member, was the cornerstone to setting good corporate governance standards. “If you don’t, then you are creating a situation of information asymmetry. And that is what we have seen time and time again,” he said.