‘Markets punish those who indulge in malpractices’

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: Madhav Mehra is president of UK-based World Council for Corporate Governance (WCFCG), founder of the Institute of Directors and president of the World Environment Foundation. A corporate guru, Mehra trains corporate leaders to improve the quality of services, environment and governance. WCFCG was founded in 2000 as a non-profit independent initiative to improve the quality of governance and gives out the Golden Peacock Awards on corporate excellence. In an interview with fe’s Aseem Thapliyal, Mehra talks about corporate governance, role of directors and auditors. Excerpts:

What are the lessons for corporate India from the Satyam fraud?

Until the scam broke out, Raju was the poster boy of corporate India. The Satyam fiasco is a systemic failure. Steps must be taken so that such scams do not occur in the future. We must change the Companies Act and ensure that the same person should not be the chairman and the CEO of the company. We should appoint directors of independent mind, and not independent directors who have neither the time nor the commitment for the company.

What should be done to salvage corporate India’s image?

We must aggressively take action because we are better than China in this respect. We should make the regulations stronger and transparent because there is a lot of money lying in the West, which can flow to India.

Should we have more regulations?

I will say if you encourage people to become the best, there will be very glossy results submitted by them. I will support the Gandhian approach on this. We should encourage companies to admit their mistakes and reward a system where companies who admit the mistakes enjoy higher degree of trust than the others. I believe quarterly disclosure is a wrong practice as it tempts companies to make up something, which does not exist. I would say transparency should become the armour. We must know that not much would happen by having more regulations. Markets today punish people who indulge in malpractices.

It seems the government and the private banks have lost trust in the market as banks do not easily trust each other in terms of lending. If they are taking money from the government, they are not lending it to the common man easily because there is a lack of trust.

Is there a case for the government to play a more active role on corporate issues?