Page 20 - Life Insurance Today July - December 2020

that will stand corporate in good stead in their governance- various stringent measures have been taken around the
improvement endeavors. Some of these recommendations world, like:
however have been categorized as mandatory, and have 1. High profile business failures in USA that gave calls for
since been incorporated in the Listing Agreement of the makers and checkers.
Stock Exchanges. To this extent, this initiative may be 2. Foreign Corrupt Practices Act, 1977 imposed in USA -
termed partly regulatory and partly voluntary. has its impact in India.

3. Sarbanes - Oxley Act came in place in USA
It may only be a matter of time before many of its other
revolutionizing the practice of Audit, financial
recommendations become mandatory regulations. SEBI has
disclosure, and at the same time imposing severe
an ongoing program of reforming the primary and
secondary capital markets. Good corporate governance is penalties for willful default by managers and auditors.
the key to efficiency in a competitive environment, as it 4. Similar types of symptoms lead London Stock Exchange
provides a cutting edge. It is necessary not just because it to set up Cadbury Committee for measures to prevent
is good for the shareholders and other stakeholders, it is recurrence of such phenomena.
essential because it is in the interest of the company itself 5. The Satyam scandal has shocked India. Satyam Systems,
in the present competitive environment. a global IT company based in India, had been added

to the notorious list of companies involved in fraudulent
Following KMB committee report, Listing Agreements now financial activities, that includes names such as Enron,
mandate appointment of an Audit Committee comprising WorldCom, Societe General, Parmalat, Ahold, Allied
a minimum of three members, all non-executive but the Irish, Bearings and Kidder Peabody.
majority and the committee chair is being independent as
well. The proposed company law amendment also So considering such notorious back drop at financial market,
envisages an Audit Committee comprising three or more the Corporate Governance of the insurers must focus on:
directors, at least two-third of them being non-executive. 1) Transparency in operations;
Investment is an act of faith in the ability of Corporate
2) Adherence to laid down codes of conduct.
Management. Investors expect Management to act as
trustees and ensure safety of capital and also to earn rate
of return higher than cost of capital. Management is Corporate Governance is concerned about promoting
corporate fairness, transparency and accountability. It is
expected to protect the best of investors' interest and
concerned with structures and processes for decision
adopt good Corporate Governance practice.
making, financial accountability, control and healthy
Despite various attempts, neither a globally accepted behaviour at the top level of organizations.
definition nor a universally agreed model of corporate
governance could be established so far. Though there is Henry Ford once said - "A business that makes nothing but
agreement as to general and basic principles of corporate money is poor kind of business."
governance but applications are made according to the
needs of individual insurer and existing business Karl Marx said - "Business is all green, only philosophy is
environment. grey"- that means the business is all about profits and
comforts of its rich owners and discomforts for all other
Good corporate governance is not 'one size fits all" sectors of society who are at the receiving end of the
proposition, and a wide diversity of approaches to business.
corporate governance being expected & entirely
appropriate and practice will evolve as it adapts to But much of the progress in the world would have not been
changing situations. possible without entrepreneurship which involves lots of risk
taking, planning and strategic management relating to both
Requirement of corporate governance arises because of static & dynamic as well as pure & speculative risks.

"The key to a good marriage: laugh together, cry together, strive together: do everything together."

20 July - December 2020 Life Insurance Today