Excessive regulation could hamper honest businesses, says Rahul Bajaj
Moneylife Digital Team 01 February 2011

Rahul Bajaj underlines the need for clean corporate governance if a company has to retain the trust of its customers and shareholders

"If the top management, the chairman or chief executive officer of the company is downright corrupt then corporate governance is not possible," says Rahul Bajaj, chairman of Bajaj Auto Limited. He was speaking at the "Governance Series" organised by the Confederation on Indian Industry (CII) on Tuesday.

Mr Bajaj spoke at length on various aspects of corporate governance in India and the role of an independent director.

According to Mr Bajaj, if the culture of the company's board is not correct, but is tainted by corruption, then customers and shareholders would leave the company. He said that excessive regulation affects those who run an honest business, rather than punishing the fraudsters and the crooks who will find a way to commit fraud despite regulation.

Speaking on the role of independent directors in a company, Mr Bajaj underlined that an independent director should not be on the board of more than dozen of companies, as only then would he be able to do justice. He further said that "independent directors should be able to decide if they want to be led or want to lead."

In his speech Mr Bajaj touched on tenure, liability, remuneration and the panel of independent directors. He said, "The panel of independent directors as maintained by the ministry is fine as far as they don't tell me to pick my independent director from your panel. It would be independent of me and not of you."

A question was poised to Mr Bajaj as to how independent directors would survive in the 'shoot-the-messenger/ whistleblower' regime and to this he said that "it will only succeed if he has the confidence in the mechanism created. Most of the companies have the policy to support them."

Mr Bajaj also made some general remarks on the Indian corporate sector, saying there is much scope for growth and to compete with big giant companies. Much more research and development is needed, in order to sustain and grow, he pointed out.

Mr Bajaj said India Inc is growing and there has to be a certain amount of regulation, but at the same time there has to be confidence in good chairmen and CEOs.

"We have to have some regulations, but let entrepreneurship and innovation flourish. Let us trust that the majority of chairmen and CEOs are good, not just inherently, but because their wealth and reputation depends on how well they and the company do. Let's have faith in them and then have minimal regulation to catch the crooks," he said.
 
Also sharing the stage at the event was Neville M Dumasia, executive director and head of governance, risk and compliance services, KPMG in India, who spoke on how to build effective boards, and Zia Mody, chairperson, CII M&A Forum and managing partner, AZB and Partners, who introduced Mr Bajaj.

Comments
SMSHETH
1 decade ago
For BAJAJ, it is the case of "Having one opinion for the chamber and another for the platform".

In the case of Maharashtra Scooters Ltd. he should preach what he teaches.

Using muscle and money power is the ground reality for these BOMBAY CLUB members.
nagesh kinin
1 decade ago
Mukand Ltd. Annual Report contains unrecognized losses running into millions yet they disclose profits. Both the Board of Directors and Auditors are cagey. So much for Corporate Mis-governance!
R Balakrishnan
1 decade ago
This gentleman had formed the Bombay Club, which wanted the consumer to be at the mercy of producers like him. The scooter that they sold, was kind of rationed, with premium money collected in unaccounted cash by the dealers. And two sons run the company, which was split in to parts to accomodate the family. Now they talk about corporate governance! what rot!
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