Report: Conference on Corporate Governance at the National Law University, India

CONFERENCE ON GOVERNANCE 2009

19 MARCH 2009 – 20 MARCH 2009

The two day National CONFERENCE ON GOVERNANCE 2009 was organised by the
National Law University, Jodhpur. The Conference began with a Welcome Address by
Hon’ble Mr. Justice N.N. Mathur (Retd.), Vice Chancellor National Law University, Jodhpur.

This was followed by the Inaugural Address by Mr. D.R. Mehta, Former Deputy
Governor RBI and the Founder Chairman, SEBI. He expressed his dismay at the bonuses
received by the executive of AIG even though the company was a beneficiary of the Bailout
Plan. In his exhaustive address, he dealt with issues ranging from self regulation, statutory
auditors and compliance requirements to various Committees which have dealt with
revamping the existing regulation mechanism. He even dwelt upon recommended changes in
the Companies Act, faulty regulation in reference to the subprime crisis, power sharing
among RBI, SEBI and Department of Company Affairs. He also questioned the role of
Auditors, Regulators and Independent Directors-who allowed a scam like Satyam to happen.
In his address, Mr. Mehta talked about a wide range of issues which emphasised the
importance of Corporate Governance in the present times. He recounted the incident, when as
the Chairman of SEBI, he persuaded Kumaramanglam Birla to write the first report on
Corporate Governance. Though the CII had prepared a report, the same suffered from the
following lacunae: a) no mention of accounting standards or financial disclosure and b) it was
against any form of legal introduction of Corporate Governance.

The issues that the Birla Committee sought to undertake were a) introduction of
industrial democracy, b) overhauling of accounting norms, c) establishment of remuneration
committee on mandatory basis and d) insider trading. When the report was prepared, Lord
Cadbury, praised the Report, specifically Clause 49, as the most comprehensive report. He
personally congratulated Mr. Mehta on his visit to Bombay.

He further spoke about the Narayan Murthy Committee and the Department of
Company Affairs initiative Naresh Chandra Committee. Though he expressed his utmost

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regard for Mr. Naresh Chandra, he expressed strong disagreement with the findings of the
Committee that SEBI should not undertake sub-ordinate legislation over matters within the
domain of the Ministry. Such, an understanding, he believed would in effect make SEBI a
nullity.

He further went on to highlight how Corporate India has been stalling the passage of
the new Companies statute for over ten years now. He also brought forward a series of
regulatory failures:

•
The American failure to regulate activities of the Banking Industry which had
diversified into other areas-investment banking, brokerage, merchant banking etc. In
this context, he recounted how when as the SEBI Chairman he had stressed upon self-
regulation at a G20 meet and other delegates were disinclined to appreciate his
concerns.
•
The Harshad Mehta Scam
•
Multiplicity of Regulators – ‘too many cooks spoil the broth’. He praised the United
Kingdom model with a single regulator the Financial Services Authority. Though the
model has been rejected in India on grounds of large size, he opined that there is a
serious need to revamp the regulatory system in India, where there almost eight to ten
agencies dealing with similar issues.
He also addressed the issue of Corporate Social Responsibility and remarked that
earning wealth is easy, giving away wealth is difficult. He described modern day Corporate
as “economic cannibals”. There is lack on part of the Corporate World to conduct effective
charity. He described “NGOs” as fifth estate of our democracy having a significant role to
play in the society.

The Guest of Honour, Hon’ble Mr. Justice Vineet Kothari, laid emphasis on the
problems of regulation and implementation of norms in our system. Placing significance of
values, he observed that there are people performing their duties with full sincerity. He called
the attention of the gathering to the lack of resources the nation is facing at the present,
especially the Judiciary. He drove home his point by likening the Indian judiciary to Aamir

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Khan of Ghajini fame. He was also worried about the size of bureaucracy in the country, the
lack of accountability on their part, large funds available at their disposal and the widespread
corruption. In such a scenario, good governance is not possible. He asserted that this
Conference was an instrument of public debate and hoped that the talk about Governance will
not be confined to times of recession alone.

After this Mr. D.D.Rathi, M.D. & C.F.O., Grasim Industries addressed the gathering
and said that the object of the seminar is to educate leaders and business managers of
tomorrow about good governance. He mentioned that good regulation is needed and yet self-
regulation should not be done away with. The scope of governance needs to be extended to
the corporate world, the society and the State. He hoped that Satyam does not emerge as the
face of Corporate India.

Mr. Hitender Mehta [F.C.A., F.C.S.], Partner Vaish Associates, said that the Satyam
fiasco as an aberration and an instance of obsessive greed. He was optimistic about the
regulatory system in India and observed that despite recession, our regulations have held
good. He suggested strong punitive action against those responsible for the misfeasance and
corporate scams to act as a future deterrent.

At the end of the Inaugural Session, Mr. Dinesh Kothari addressed the gathering. He
is a prominent Management Consultant and Educationist running many educational
institutions In India and abroad. He laid emphasis on the need for self-compliance and self-
monitoring to prevent future frauds and to march towards good governance in all fields.

The first Technical Session was on the issue of “Corporate Governance and
Corporate Social Responsibility”. The Chairperson of this session was Padma Bhushan Mr.

D.R. Mehta. The Guest of Honour was Hon’ble Mr. Justice Vineet Kothari, Judge, Rajasthan
High Court. The Principal Speaker, Mr. Hitender Mehta talked about the need for reforming
the regulatory mechanism, shareholder activism and compliance in letter and spirit. The
Keynote Speaker for the session was Mr. D.D. Rathi, who dealt with the practical aspects of
regulations. He discussed at length about the balance between self-regulation and overregulation.
At this note, Prof. U.R. Daga [Dean, Faculty of Management Studies, National
Law University, Jodhpur], intervened to end the dilemma and coined the term ‘effective’
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regulation. The papers in this segment focussed on providing a detailed explanation of
Corporate Social Responsibility and importance of ethics.

The second day began with the Second Technical Session on “Corporate Frauds”. It
was chaired by Mr. B.M. Kothari, Honorary Director, Centre of Studies in Taxation, National
Law University, Jodhpur and former Senior Member, ITAT. He addressed the gathering
about the rules and regulations involved in corporate governance and emphasised on the need
to imbibe SEBI regulations.

The Guest of Honour for this session was Mr. K.N. Bhandari, Director, Centre for
Studies in Insurance. He focused on the need for renewing the investor confidence in light of
the recent Satyam scam. He said that the loss of public money is a grave matter. For the
future growth of the Indian economy, we need to be more pro-active in terms of investor
protection.

The Keynote speaker for the session was Mr. Anant Baraua, Legal Advisor, SEBI. In
his address, he reiterated the importance of using money of the investors with care and
making the management more accountable in dealing with the shareholder’s money.

The theme of the third session was “Role of Civil Society in Governance”. The
Chairperson of this session was Mr. B.P. Jain, Commissioner of Income Tax. Governance in
India, he remarked, was merely compliance. He narrated an incident involving an NGO
which received Rs. 11 Lac in aid, but did nothing with the funds. The problem was how to
identify and punish the culprits. He suggested making a proposal to the Ministry of Home
Affairs for regulating the activities of NGOs.

Mr. Dinesh Kothari was the Guest of Honour of the session. He opined that economic
meltdown is a meltdown of ethics and professional values. The idea of “regulation” is not
alien to humanity -the Divine Regulator, the Almighty, regulates all of us. The ultimate test
of wisdom is in knowing what is not right, what is wrong?

NGOs unfortunately have become vehicles of personal gain, rather they are self
chartered institutions capitalising upon kindness of Government and flexibility of laws to
their own advantage. There is also no Centralised Information System to obtain and monitor

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activities of NGOs. We must educate our children so that they don’t become future
Ramlingam Raju. He strongly warned against disintegration of families.

He emphasized that the issue for further debate is what more can be done to make
laws more effective and enhance transparency? The beginning point for this overhauling
process can begin from how schools are organised in India. Currently, schools can be
operated only by Not-For-Profit entities, while their actual reality is known to all. Mr.
Bhandari suggested that corporate should also be allowed to operate schools to ensure that
proper access to education is provided.

The keynote address by Mr. K. Sampath highlighted the changes that have marked
the Indian polity since the time of independence – how political system then was driven by
ideologies and neither money nor power. In the Nehruvian era, the government undertook the
task of establishing heavy industries in a modest budget. However the onslaught of
competition has resulted in many changes. He also traced the transition in the Indian business
scenario from corporate inefficiency to arm twisting in bureaucratic circles which kept the
FIIs away in the initial days of globalisation to Infosys, which he described as a
“phenomena”.

Rishabh Sancheti, Alumnus, National Law University, began his address by narrating
Gandhiji’s experience in managing the Pheonix Settlement where funds sufficient only for
daily needs were maintained. He opined that human beings are essentially rational self-
interest beings and NGOs were no exception. Any law aiming to regulate NGOs should
attempt at striking a balance between self-interest and public benefit. He proposed a three
pronged approach: a) regulate the donation money, b) establish parameters to evaluate NGO
performance, and c) peer review.

The paper presentations in this session discussed the issue of NGO participation in the
task of policy formulation. This session marked the end of the two day Conference.