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Governance in India: Bringing the Courtroom to the Boardroom

"On matters of style, swim with the current,
on matters of principle, stand like a rock."
–Thomas Jefferson

Call it an evolution or simply a turning point, but it’s indisputable that basic human necessities have shifted from “roti kapda aur makaan” (food, clothing, and shelter) to “bijli, sadak aur paani” (power, road, and water). The same is true for the corporate canvass, where the survival of the business has progressed from “products, process, and profit” to “people, process, and principles.” The fulcrum of this change is “compliance and governance,” occupying the centre stage in the corporate agenda.

[Related: 10 Tips for Conquering Cross-Border Internal Investigations]

In 2013, India saw two major corrections in the corporate philosophy of the organization. First was the Companies Act, 2013, which shifted the focus of compliance from “policing” to “self-regulation.” Second was the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 that empowered the local management with the powers of a civil court to administer the law. Both of these regulations brought the courtroom to the boardroom, making the people closer to business and also more accountable for running it, as per the law.      

Since these laws have passed, compliance has shifted from “good to do” to “need to do.” The growing importance of compliance is evident, considering how the absence of a proper compliance infrastructure has now translated to business risk. Here are the top 10 areas where the absence of compliance may hurt your business:

  1. Statutory compliance: Defining and identifying business operations and functions that are prone or vulnerable to cross the boundaries of law. This needs spelling out what is illegal vis-à-vis what could be breach of law;
  2. Commercial contracts: Monitoring representations, warranties, and the indemnities of business transactions, as well as the resultant rights and obligations that arise from it;
  3. Litigation and regulatory action: Devising a seamless way of managing conflicts without jeopardising the public image and impacting the business interests of both the internal and external stakeholders;
  4. Competition and anti-trust: Outlining the turf area and terms for sharing the business space with our business counterparts in the spirit of mutual co-existence;
  5. Claims, brands, trademark, and marketing material: Creating and protecting the intellectual property rights of the business;
  6. Communication: Ensuring standardisation, consistency, and clarity in the corporate messages landing with different stakeholders in one voice;
  7. Employment: Creating fairness and equity in providing employment opportunities to people managing displacement with utmost empathy and alternate remedies;
  8. Safety and quality: Setting the standards for continuous improvement and make it an avenue for customer centricity and innovation agenda of the organization;
  9. Mergers and acquisitions: Performing pre- and post-due diligence for seamless integration of the businesses; and,
  10. Corruption and bribery: Making transparency, accountability, and disclosure the competitive edge of the business.
[Related: Top Ten Issues in Corporate Governance Practices in India]

The relationship between compliance and governance is vital yet precarious, and is perfectly illustrated in this brief story.

A young boy was walking on a rope bridge with his father. As strong winds blew, the bridge shook and the little boy was about to lose his balance. “Son, hold my hand if you are falling,” he father tells him. “You hold my hand instead, dad,” the boy retorted. “What’s the difference?” the father asked. His son answered, “When I hold your hand, it’s out of fear that you may leave when I am no longer afraid. But when you hold my hand, it’s out of responsibility. No matter what, you will not leave me, until you see me safe.”

Replace the son and father with compliance and governance, respectively, and you’ll see why this bond is so critical. Compliance practices will undoubtedly fail when implemented out of obligation. We as in-house counsel must never institute a new program or policy out of fear, but out of responsibility. At the end of the day, companies outlive people; brands outlive companies; and compliance outlives brands. In order to maintain this delicate balance and survive, we must find safety and encouragement in the hands of governance.

About the Author

Mahalakshmi RavisankarMahalakshmi Ravisankar is a seasoned compliance professional, with over 30 years of corporate experience in leading multinationals, such as Unilever, Diageo India, and ABB India, and has earned her LLB and CS degrees. She has a diverse experience in setting up compliance and governance framework in companies, such as Marico India, Times of India, and Beiersdorf India. She is currently working on a project COMVERVE, a prototype for implementing compliance programs through effective communication and community initiatives.

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