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Leadership for Effective Governance: Intent vs. Compliance

In the realm of effective governance, the interplay between intent and compliance is a critical consideration. Leadership plays a pivotal role in determining the balance between these two elements, and the success of any organisation often hinges on how well it navigates this delicate equilibrium.

Intent in leadership refers to the overarching goals, values, vision, mission, and principles that guide an organisation's decision-making processes. Effective leaders are those who not only communicate their intent clearly but also ensure that it permeates the culture of the organisation.

Compliance, on the other hand, involves adhering to external and internal regulations, standards, and laws. In many industries, compliance is non-negotiable, as it helps maintain legality, integrity, and ethical conduct and ensures operation within the boundaries of the law and industry best practices.

Balancing intent and compliance is not always straightforward, and leaders often find themselves grappling with competing priorities. Effective governance hinges on leadership's ability to harness the power of both intent and compliance, recognizing their interdependence. Here are some key principles to consider:

Indeed, successful leaders are those who can strike the right balance, leveraging intent to inspire innovation while ensuring compliance to maintain trust and integrity.

Clarity of intent: Leaders must articulate a clear and compelling intent that resonates with employees, stakeholders, and customers. This intent serves as the organisation's North Star, guiding decisions and actions.

Ethical leadership: An organisation's intent should always include ethical principles that prioritize honesty, integrity, and responsible conduct.

Compliance as a foundation: Compliance with laws and regulations should be non-negotiable. Leaders must ensure that their organisations understand and adhere to all relevant legal and industry standards.

Continuous learning and adaptation: The business landscape is ever-evolving, and leaders must stay informed about changes in regulations, industry trends, and emerging risks. This knowledge enables them to make informed decisions that align with their intent while maintaining compliance.

Effective communication: Leaders must communicate their intent and the importance of compliance clearly and consistently throughout the organisation.

U GRO Capital: A case study of intent-driven governance for excellence in leadership

U GRO Capital Limited is India's first listed data-tech-driven lending start-up. While lending businesses are governed by the regulations of the Reserve Bank of India (RBI), as a listed company, it has an obligation to meet the governance standards of listing regulations and the Companies Act.

However, in 2018, when the founding team, along with some of the global private equity investors, envisaged the idea of incubating the platform, the first and paramount question that came up was that of the company's governance and how it would be setup in a way that instills confidence that U GRO Capital will evolve as a leading financial institution. U GRO was started with an initial capital raise of approximately Rs. 1000 crore of equity capital, with a view to making it an institutionally owned, board-supervised, and professionally managed company with a unique structure that evolved to achieve this very objective. Alongside the capital, U GRO designed and adopted the following as articles:

(1.) The founder or promoter would not have the power to nominate more than one board member.
(2.) The majority of its board would consist of independent directors.
(3.) Any shareholder who owns more than 10% of equity capital would have an automatic right to nominate a board member.
(4.) No major strategic decision can be taken without the consent of the shareholder nominee. However, company decision-making would remain in the hands of the majority of independent board members.
(5.) Its Chief Risk Officer and Chief Finance Officer cannot be appointed or removed without the consent of independent board members.

This governance structure is superior to the regulatory requirements and ensures that, as an emerging large financial institution, there is a balance between the interests of shareholders and the public at large.

This is a demonstration that governance is not mere compliance with regulations but more of an intent that needs to be practiced. Indeed, successful leaders and, in turn, companies are those who can strike the right balance, leveraging intent to inspire innovation while ensuring compliance to maintain trust and integrity.


Mr. Shachindra Nath

Mr. Shachindra Nath

He is the Founder and Managing Director of U GRO Capital.

Owned by: Institute of Directors, India

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