Advocating the need for strong corporate governance practices, noted banker Deepak Parekh has urged company secretaries to adopt the “speak up culture” as well as differentiate between data and information to enable board members to constructively act on developments.
The judgement of company secretaries is sacrosanct and they are the bridge between understanding what the regulator expects and how the board actually functions, Parekh, who is the Chairman of HDFC, said.
Amidst instances of corporate misdoings coming into light in recent times, Parekh, who was also a key person in steering the revival of then fraud-hit Satyam Computer Services in 2009, said that generally, the listed parent company which sits at the top gets all the attention and compliances tend to be in good order.
“But invariably, it is the myriad of smaller, unlisted subsidiary and associate companies which tend to receive less scrutiny and is where the weak points lie. Unethical practices, away from the public eye typically happen at these levels. Genuine regulatory lapses too happen at these levels. So look deep and holistically at your group structure.
“… your overall compliance is only as good as your weakest link,” he noted.
Speaking at the 21st ICSI National Awards for Excellence in Corporate Governance on Saturday, Parekh emphasised on the clarity of communication with the board.
“It is easy to dump huge volumes of files and data and believe one is ticking the box on compliance. Recognise the difference between data and information which can enable board members to constructively and proactively act or react,” he noted.
Urging the company secretaries to adopt the “speak up culture”, Parekh said the “do what the board or management wants” is possibly the worst trait to have as a company secretary.
“You are privy to many discussions and it is your responsibility to lay it out in black and white if you feel the board is going awry. Vision is always 20/20 in hindsight. Stand your ground. Yes, it is always easier said than done. But do remember, speaking up is also watching the back of your management and independent directors,” he pointed out.
Without mentioning any specific instances, Parekh, a well-respected corporate leader, said that in the banking sector particularly, time and again there have been assurances that there will be no overreach of the 3Cs — the CBI, CVC and CAG and yet, “loopholes in the law continue to hold the innocent to ransom”.
If the internal governance structures are strong, incentives of key executives are reasonable and companies are sensitive towards their stakeholders, Parekh said then they are less likely to run into troubled waters with shareholder activism.
“Yet, boards and companies can be susceptible to irrational or disruptive activism,” he said.