To be, however, fair to the proponents of the corporate governance code, it must be conceded that its pious aim was not to set a new element of efficiency and honesty in the area but to divert attention away from the current ailments and the solutions therefor. In short, the code in circulation has effectively shifted attention from the basic regulatory issues which need to be implemented urgently in the country. The code thus has achieved its dual objectives. First it has brought in enough glory to its proponents. Second it has successfully swept under the carpet the important regulatory issues in the matter of running business in the country.

Corporategovernance assumes importance because it is the key factor to business prosperity. Business prosperity, in effect, includes the whole gamut of tangible and intangible assets of a corporate entity. That, in the long run, determines the performance of the company and acts as the source of motivation for each of the stakeholders involved in the various stages of the company's operations.

Business prosperity or value of business is the sum total of its physical and financial assets and intangible knowledge capital. Intangible knowledge capital includes brands, patents, franchise, software, research programmes, new ideas, expertise, etc. While judging a company's profile, one has to use the above principle and estimate both tangible and intangible assets of a company. One must look, inter alia, at - the tangible elements like financial soundness, use of corporate asset, long-term investment value, along with quality of product or services, innovativeness, ability to attract, develop and retain talented people,community and environmental responsibility and quality of management. Given the observance of the regulatory framework set up to protect the interests of all stakeholders in a company, good corporate governance code will try and maximise the eight elements mentioned above.

Of all the stakeholders - customers, employees, suppliers, credit providers, local communities, government and shareholders - a company's board is expected to serve only the last one ie, shareholders. it will take care of interests of other stakeholders only when it is necessary for the long term enhancement of shareholders' value or to meet the rules laid down by regulators.

A company is accountable to the shareholders only to the point of share value enhancement and not for the running of the company. Shareholders are a heterogeneous group ranging from individual shareholders to institutional investors. With the option of buying and selling of shares, the permanence of their stakes are not guaranteed. Shareholders are not businessmanagers.

The board of a company has to play the most important role to ensure economic efficiency, transparency of policy, development of relationships with stakeholders and implementation of the code of corporate governance. As long as the compliance to corporate governance codes remains voluntary it will not be implemented across the board. Irrespective of the size of the company, the compliance to the code should be made mandatory by the rule of law.

The consumers' interest, for instance, is protected by government regulations. The board's role will merely be to maintain and enhance the brand image as to find greater acceptance among the customers. It has also to formulate a proactive after-sales policy.

As regards the relationship with the employees, the board has to develop knowledge base. It must, therefore, promote professional managers, have transparent employee policy. The aim is to upgrade employee skills periodically. In its relationship with credit providers, the board has to ensure atransparent servicing of loans with loans being used for the specific purpose for which they have been granted.

Finally the board has to protect shareholder rights as custodian of shareholder interest. For that there must be equitable treatment. To ensure that such rights are maintained the simplest course of action is to make the board jointly and severally responsible for any violation of the rules laid down by the regulators or any statutory code of corporate governance. The deterrent punishment for failure to do so will ensure observance of all possible codes of corporate governance.

Based on the above framework one may look closely at the corporate governance code doing the rounds. Out of the 17 suggestions, one-third should not form part of the corporate board's concern. These issues have to be tackle by effective regulations. Another third of these, like regulations on the number of boards one should sit or qualification of non-executive directors etc - are not important. The single criterion ofdirectors being jointly and severally responsible will take care of all these issue. Remaining few suggestions cover how the Board should act - constitution of audit committees, information flow to the board etc. When board members are held accountable for any wrongdoing, they will find their own methods of governing the company efficiently. For that no code is necessary.

The single most important point missing in the code is the accountability of directors. Instead it has attempted to build into it what is regulator's concern - one such example is how rating should be made public. In short, the code has effectively brought in additional confusions in the area of regulating recalcitrant companies and corrupt boards. Predictably so. Just look who has drafted it.