Corporate governance has to evolve from within: Parekh

Mumbai, Feb 19 (UNI) HDFC chairman Deepak Parekh today said corporate governance culture cannot be dictated or created overnight and that it has to evolve from within the organisation, with the top management setting an example.

''The world over, observers have recognised that legislation and regulation have a limited role in enforcing the spirit of corporate governance. Sheer compliance may not warrant better governance and it is only those companies which look to adopt measures that go above and beyond their governance obligations which would be rewarded in the long run. The companies that will command a premium will be those driven by self-motivated governance agendas,'' he observed while addressing a session on 'Relationship Between Good Governance and Good Performance', a part of the ongoing Confedaration of Indian Industry's (CII) Corporate Governance Series.

Underlining the high level of corporate governance standards followed by top Indian corporates, Mr Parekh highlighted the fact that India has been consistently ranked among the top three countries over the past five years in surveys conducted by the CLSA and the Corporate Governance Association.

''Companies with active, interested and involved shareholders are more likely to achieve superior long-term returns than their competitors. Shareholder value will be more if the company is ethically run and this will reflect in its performance. A competitor resorting to unethical methods may show higher profits, but it will definitely have a much lower standing than a company that follows good corporate governance practices,'' he noted.

Emphasizing on the need for independent directors to play a greater role in ensuring corporate governance, he also called for performance evaluations to distinguish the ''board sitters'' from the ''board contributors.'' He also pointed out that the role of the nomination committee needs to change and that it should not be a ''cozy club.'' Elaborating on the theme, the Chairman of the Godrej Group, Adi Godrej, emphasized that good governance leads to good performance and good performance leads to great value creation.

UNI