Today, inflated valuations and short-term gains have put the principles of corporate governance on the back burner. As we have seen, a lack of transparency and accountability in India’s corporate sector has led to a lack of trust in the country’s businesses, which is bound to deter foreign investment.
When governance takes a backseat, it adversely impacts the reputation of not only the company and its CEO/founder but also tarnishes the image of the country. As India strives to improve its rankings on several global parameters, it is high time that leaders focus on corporate governance and create independent boards that work for the betterment of the company, employees, and shareholders. Reputation plays a major role in good governance, and the onus of self-regulation falls on the founders, who must ensure tighter regulations and put in place effective monitoring mechanisms to promote transparency.
Governance and Startups
The Indian tech startup scene has been marred by a series of controversies in the past year, including financial irregularities, sexual harassment, and unethical marketing. These issues have impacted the reputation of promising startups and underlined the need for better governance and ethical practices.
Sustainable Growth over Growth-at-all-Costs
Many startups tend to exaggerate their numbers to grab the attention of investors and present an inflated image of their business. However, experienced entrepreneurs prioritize long-term sustainability over short-term growth. Building a solid and enduring company takes time, and resisting the pressure from venture capital funds for early exits is essential.
Transparent Communication
Creating transparent and honest communication between founders and investors is crucial. An open communication channel encourages trust and allows investors to use their knowledge and connections to support startups, even during tough times. Preserving integrity is essential, as any breach may result in a rigorous examination of governance frameworks and potentially harm the company’s reputation.
Self-Regulation
As businesses grow, their governance frameworks should evolve to align with strategic goals. Early implementation of corporate governance and self-regulation norms can lead to benefits such as enhanced accountability, improved decision-making, reduced risk, increased access to capital and partnerships, and a stronger reputation.
As Narayana Murthy said in a podcast recently, good governance is a way of life and a philosophy that needs to be imbibed early on, much like how a child instinctively knows how to breathe or eat without being taught. Is Corporate India listening?
