Drastic changes needed to implement ethical conduct

The downfall of major banking and insurance corporations, motor vehicles manufacturers and other corporations in the US is a testament to the unprecedented economic crisis. India too, has started to feel the heat of the global meltdown. The recent Satyam scandal has revealed that corporate governance in India is inadequate, compromising the interests of shareholders and other stakeholders i.e. entities directly or indirectly involved with a corporation.

This inadequacy can partly be attributed to an absence of adequate management and risk evaluations and the lack of stringent enforcement against transgression at top management levels. Although the two concepts are old, their implementation requires drastic changes and a complete overhaul.

A well-governed company develops its internal code of conduct in a manner which ensures ethical conduct of business. Shareholders expect companies to conduct business in an ethical manner which involves fairness, transparency, accountability, and responsibility at the board level.

Priti Suri is the proprietor of PSA and Ashutosh Chandola is an associate at the firm.