Good Corporate Governance Practices for 2024

The global regulatory landscape around corporate governance has undergone dynamic changes with increasing complexity, and those entrusted with governance, i.e., the Board of Directors and the Audit Committee, are being made responsible. The focus on 'effective governance' emphasizes transparency, accountability, and integrity in the organisation, urging entities to adopt emerging best practices to benchmark global standards.

As the famous quote goes by Mr. Warren Buffet, "If you think compliance is cumbersome, expensive, or a nuisance, try noncompliance. It takes 20 years to build a reputation and 5 minutes to ruin it."

In my view, below are a few good governance practices that entities may adopt, as these are the needs of modern-day organisations.

Raising the governance standards in the board rooms and the constitution of statutory committee management through:

(1.) Diversity: An optimum mix of the Board of Directors is important to ensure that the company is benchmarking the global norms. We, at Blue Dart, follow and benchmark the best practices in terms of 'Diversity and Inclusion' with a wide range of skills, experiences, cultures, and viewpoints that give the organisation an in-depth, breadth, and diversity as a part of the DHL Group.

(2.) Independent board: This goal may be achieved by associating a sufficient number of independent directors with the chairman, who is also independent, so as to ensure that there are no actual or perceived conflicts of interest, which is paramount to good corporate governance practices. Further, the Lead Independent Director will amplify the impact of collective voice in driving the change in governance standards in the Board Rooms.

(3.) Voluntary committees of the board: The companies must endeavour to constitute certain voluntary committees, viz., the ESG Committee, Ethics Committee, CSR Implementation and Management Committee, etc., that support the board in achieving the strategic objectives of the company and strengthening the governance processes of the company. Each committee may be guided by its own charter or 'Terms of Reference' (composition, scope, powers, duties, and responsibilities) of the respective committees.

The companies must formalize a code of conduct for the board and senior management team, its employees which articulates the Company’s expectations from its people to reflect on the ethics and values of the organisation.

Succession planning

The succession planning process may be adopted and documented, which will act as a guide in identifying crucial positions in the organisation and being prepared for any unforeseen gaps in the leadership.

Board evaluation

Board evaluation has emerged as one of the priorities of corporate governance in recent times globally since 'what gets measured gets managed, and among senior leaders, what gets acknowledged and valued gets done even better'. As a good practice, companies may develop a policy of board evaluation wherein directors should be encouraged to formally recognise the feedback of successors, which will enable them to implement the mitigation plan for maximum impact.

Transparency and disclosures

Corporate governance involves a set of relationships between the company's management, board of directors, regulators, shareholders, and other stakeholders. Corporate relationships thrive on transparency and timely disclosures with regard to all material matters concerning the corporation, including its financial results and non-financial disclosures.

Stakeholders' satisfaction survey

The survey shall enable the Organisation to understand the stakeholders' expectations and needs and therefore serve as one of the major inputs needed to make investment decisions.

Employee engagement process

For employees to contribute to achieving organisational goals, organisations should encourage 'Speak Up' culture in order to be on par with corporate governance standards. Employees must also be made aware of the 'Incident Management Reporting Process', to report any fraud or a complaint in their knowledge. The companies should also commit to a healthy and congenial work environment for their employees. To identify the gaps, organisations may conduct an Employee Satisfaction Survey (ESS), which would help build trust among employees.

Corporate policies

The corporate governance framework reflects its culture, policies, relationships with stakeholders, and commitment to values. Corporate policies are an essential component of any Organisation to ensure that the management is consistent in its decisions. Among the other corporate governance structures in place, the companies may formulate the following policies:

A POSH policy for all its employees is to provide refresher training, thus providing a safe working environment and a mechanism for raising grievances.

Whistleblower policy: Companies must have a vigil mechanism to manage their business affairs fairly and transparently with a firm commitment to their values.

Competition compliance policy: At Blue Dart, the employees undergo training on 'Competition Compliance' as per the policy on a periodic basis to ensure compliance.

Code of conduct

The companies must formalize a code of conduct for the board and senior management team, its employees which articulates the Company's expectations from its people to reflect on the ethics and values of the organisation. Thus, the company's code of conduct upholds the principles of human rights and fair treatment.

(1.) At Blue Dart, we also have a 'Supplier Code of Conduct' which enshrines the minimum standards expected by the vendors of the organisation.

(2.) Anti-corruption and business ethics policy: The companies may also have in place this policy which would stipulate the permissible limits along with reasonable business practices while dealing with any third parties.

Corporate Social Responsibility

Giving back to the society is not just a 'Corporate Social Responsibility' but is a duty as an organisation towards the environment from where it draws its resources from. Blue Dart, as a part of the DHL Group, aims towards clean operations for climate protection (Environment), being a great company to work for all (Social) as well as being a highly trusted company (Governance). The Corporates must also be encouraged to conduct CSR Impact Assessment by an External Agency in respect of the CSR Projects undertaken by the Company to assess beneficial impact on the Society.

ESG Initiatives

(1.) Environmental, Social and Corporate Governance (ESG) is evolving and Companies are no longer evaluated only from an economic perspective, but also from a societal and environmental perspectives.

(2.) Companies may formulate a Human Right Policy on UN Directives which shall enable the organisations to set a process to cover diversity, no discrimination, gender equality etc.

(3.) Companies must strive to conduct 'Sustainability Audits' in benchmarking their practices with best industry practices.

Risk management and internal controls

The risks that companies face aren't static; they constantly evolve, as the emergence of risks arising from cyber security, data breaches, war, and pandemics illustrates. In this dynamic regulatory landscape, the functions of governance, risk, legal, and compliance officials have greatly evolved, becoming critical in advising senior management on anticipating varied risk scenarios, whether domestic or geopolitical. This transformation guarantees that the organisation implements the essential risk mitigation processes to comply with a plethora of statutory and regulatory standards.

Risk workshops

The organisations may also facilitate risk workshops at regular intervals, wherein the results of the workshops can be deliberated at the board level, followed by necessary directions and strategic inputs for mitigating the risks attributed to the organisation.

Internal controls

At Blue Dart, we have established and maintained adequate and effective internal financial controls tools, which include the design, implementation, and maintenance of adequate internal financial controls for efficient conduct of its business, the company's policies, safeguarding of its assets, the prevention and detection of fraud, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the applicable Acts.

Digitisation

I strongly believe that digital transformation has upheld the ethical quotient in the corporate world. The digital transformation has brought about an enormous change in the governance, compliance, and ethics sides of a business.

(1.) Compliance Tool: At Blue Dart, we have in place an IT-enabled compliance tool, viz., 'Legatrix', which strengthens our compliance management through in-depth coverage of legal and regulatory compliances, real-time monitoring, escalation mechanisms, organisation-wide ownership, and risk-based controls.

(2.) Automated Litigation Module: Blue Dart also has in place an 'Automated Litigation Module' that helps in tracking, managing, and monitoring legal matters and claims in a proactive manner. The tool provides smart alerts on new cases being filed or ongoing legal matters based on updates from the judicial system.

(3.) Digital Board Packs: Companies can strive to adopt and implement various digital board packs, a technologically advanced solution for simplifying board meetings and operating paperless

(4.) Structured Digital Database (SDD): With an intent to become digital and keeping in mind how stringent SEBI has become towards the practice of 'Insider Trading', a 'Structured Digital Database (SDD)' must be in place that should contain information on 'Unpublished Price Sensitive Information (UPSI)' shared and the name(s) of the person(s) who would share or recipients of such information. Adequate training on SDD must also be given to all designated officials from time to time.

(5.) IPR Protection and Brand Infringement: It is essential for companies to have an in-built mechanism for safeguarding and protecting their valuable IPRs from any brand infringement.

(6.) Contracts Management Tool: A digitised version of Contracts Management, which helps process all channel partner agreements online without manual interference and maintains the contract data.

Data Protection & Cyber Security

Organisations need to establish and maintain reasonable administrative, technical and physical security measures to protect the personal data. Organisations must oversee Management's preparedness of adequate cyber defences and responses to such incidents.

Conclusion

These initiatives have contributed to greater efficiency and are considered best practices for Organisations. As the Head (Legal & Compliance) and Company Secretary of Blue Dart, I truly believe that it is on the corporates and their senior management to maintain, conduct, and pursue their roles and responsibilities in a manner imbibing the best practices and confirming the global best standards. As rightly said, corporate governance is not just about compliance; it's about creating a culture of ethical leadership, responsible decision-making, and sustainable business growth.