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BRICS Civil Forum Global Governance and Development Finance Corporate Governance: The Global Scenario with reference to India Professor Ram Kumar Mishra Director, Institute of Public Enterprise Corporate Governance Corporate Governance is, “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations.” It encompasses the mechanisms by which companies, and those in control, are held to account. Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised Significance of CG Changing Ownership Structure Importance of Social Responsibility Global Competition Indifference on the part of Shareholders Regulatory control Accounting and transparency BRICS: Profile 48.0 67.0 59.0 Chi na South Africa 29.0 52.0 199.7 2 493 12789 2.9% 147.1 1 850 12993 3.0% 1250.2 1 676 1389 5.6% 1367.0 7 298 5414 14.3% Brazil Russia India Global Competitiveness Rank (out of 144) Population (in millions) GDP (in billion US$) GDP per capita (in US$) GDP as percentage of world total 50.8 408 8066 0.7% BRICS: CG background Brazil Russia India Chi na South Africa Irregular payments and bribes 65 120 99 67 47 Favoritism in decisions of government officials Organised crime 80 127 92 34 110 122 114 81 98 111 Ethical behaviour of firms 84 119 81 58 48 Strength of auditing and reporting standards Efficacy of corporate boards 42 123 44 72 1 38 124 75 91 1 The World Economic Forum (hereafter WEF) compiles a Global Competitiveness Report (WEF, 2012). This report analyses 12 different pillars of competitiveness, each consisting of different factors. This competitiveness ranking is an indicator of many issues, including factors such as the quality of education, infrastructure and health care. Of particular interest to this study, however, is the first pillar - examining the institutions. The factors below were chosen from the first pillar of the 2012-2013 WEF Global Competitiveness Report for comparison between the BRICS countries. Ranking in selected factors (out of 144 countries) Contribution: BRICS BRICS account for more than 40 per cent of the global population, nearly 30 per cent of the land mass, and a share in world GDP was 25 per cent in 2010 (BRICS Report, 2012:11). According to the BRICS Research Group, 2012, the five BRICS countries have collectively contributed more than 50% of the global economic growth. The study predicts that by 2030 the five BRICS countries will overtake the G8 countries (France, Germany, Italy, Japan, United Kingdom, United States, Canada and Russia) in terms of real cumulative GDP. World Governance Index Brazil: Russia: India: China: South Africa: Evaluating countries based on peace and security, rule of law, human rights and participation, sustainable development and human development CG Compliance: BRCIS Michelle I Caron, Influence of Corruption on Corporate Governance Standards, Emerging Markets Journal, Volume 2 (2012) BRICS: Transparency International Index Countries Brazil Russia India China S.Africa Rank 76 119 76 83 61 CG Codes: BRICs Brazil Russia India China South Africa Issued by the Brazilian Institute of Corporate Governance (IBGC, 2009) Issued by the Federal Service for Financial Markets of the Russian Federation (EBRD, 2014) Companies Act 2013 Ministry of Corporate Affairs, GoI Issued by the China Securities Regulatory Commission (2004) Issued by the Institute of Directors in Southern Africa (King III) (2011) Comparative Analysis of Good CG Practices CG Practices recommended in the UN guide Brazil Russia China S. Africa India Ownership Structure and the exercise of control rights 9 9 8 8 1 Financial transparency and information disclosure 7 8 6 6 3 Auditing 7 7 6 7 6 Corporate Responsibility and Compliance 5 5 1 5 3 Board and management structure and process 18 15 15 15 13 Source: Comparative Analysis of the Corporate Governance Codes of the Five BRICS Countries, Contabilidade, Gestão e Governança - Brasília · v. 17 · n. 3 · p. 49- 70 · set./dez. 2014 BRICS: Key Issues in CG In emerging markets such as BRICS it is found that any profits for shareholders are eroded by the shadier legal frameworks and poor corporate governance practices (Hallam 2012:13) Although, each of the BRICS countries offer growth opportunities, they all carry significant risks owing to their poor governmental structures, business practices and legal frameworks. (Blackwell and Stippich 2012) Other key issues include : Poor CG practices hampering countries to mobilise finances in domestic and international markets Money laundering and terror funding improving shareholder voice and enforcing rights ensuring corporate integrity and disclosure and transparency Protecting minority shareholders rights Women on Boards Boards were considered a ―boys’ club,‖ with more than 40% of companies still having an all-male board. Across continents, the representation of women on boards is far from acceptable. Although in four European countries (Norway, Sweden, Finland, and France) women occupy more than 20% of the seats In other countries including the United States, UK, Germany, and New Zealand, women representation on boards is only between 8% and 16%.These countries are in the list of top 25 countries. The proportion of women in developed economies like Japan (0.9%), UAE (1.2%), The BRIC nations—Brazil (5.1%), Russia (5.9%), and India (4.8%)—is minimal. Several countries such as Peru and Morocco have only all-male boards Women Climbing up the ladder! The highest proportions of women with senior roles are in the BRICS nations–Brazil, Russia, India, China, and South Africa. women comprise 30 percent of senior management positions, which is higher than the global average (24 percent). none of these countries have enacted compulsory quotas or legislation addressing this issue. Russia has the highest proportion of women in senior management globally (43 percent) without this type of gender programming. Between 2012 and 2013, China doubled the number of senior management roles held by women from 25 per cent to 51 per cent. Work done by Maria Saab, J.D., research fellow at the New America Foundation,And a contributor to New America’s Global Gender Parity Initiative. The Credit Suisse Research Institute’s CS Gender 3000 report for 2016 indicates that companies with higher participation of women in decision-making roles continue to generate higher market returns and superior profits. Based on the analysis of Credit Suisse Gender 3000, which encompasses 27,000 senior managers at over 3,000 companies, the number of women on boards in India has doubled over the past six years from 5.5 percent in 2010 to 11.2 percent in 2015. Indian Scenario A study done by Bloomberg shows today, there are 22 female chief executive officers of publicly traded companies in India, the developing country with the second-most women holding CEO or equivalent posts, and China being at No. 1 India’s Companies Act of August 2013 requires all businesses trading on the stock market to have at least one female director. Currently, about 6 percent of publicly traded companies in the nation have women on their boards. Buoyed by wider educational opportunities, laws mandating female participation in corporate governance and government support for children and families, businesswomen in emerging nations are narrowing the gap with their more developed counterparts. Ten years ago, there was just one female director of an emergingmarket-based company. Now there are more than 1,500, according to data compiled by Bloomberg. The 2015 Census is the only one of its kind in South Africa that provides the most comprehensive and insightful analysis of women in leadership, spanning across various organisational entities and economic sectors in South Africa Women are mostly appointed in NonExecutive directorship positions. Only 9.2% of women holding Chairperson positions - women remain a minority within a minority. Only 2.4% women are appointed in CEO positions. Women are still excluded from the most important key decision-making positions within organisations. Black women are best represented at Director level, White women are more representative at the Executive Management level. The research conducted also draws on international benchmarks and sites South Africa as a top performer amongst BRICS countries with almost double the percentage of women Directors, compared to its nearest competitor, China (at 11.1%). Financial Characteristics of Companies with Strong Female Leadership Projections for Reaching 30% Women Boards Key Points: India Policy regulations are applicable for corporate and public sector alike Public opinion being generated for support to issues on curbing financial frauds Media playing a key role SOEs have higher level of compliance Women participation –a high priority aspect CSR is a key element Thank You