Page 34 - Banking Finance June 2021

ARTICLE

presence of vigilance officers. Despite all this, Corporate the top. In majority of the business organisations, whistle-
governance has been coming under public scrutiny and cases blower policy has been framed and adopted but it has not
of governance failure in banks has forced RBI to look at the garnered active support from the employees as there is a
"Corporate Governance" afresh. To improve,Basel trust deficit.
Committee on Banking Supervision (BCBS) has
published"Corporate governance principles for banks in July Corporate governance and ethics are closely interlinked. On
2015". Recently, RBI has come out with a discussion paper the one hand corporate governance requires framework of
on this issue which has resulted into a meaningful and serious rules clearly defined roles and responsibilities and well laid
discussion among different stakeholders. down systems and procedures, on the other hand it requires
that governance framework is fairly executed and here
One of the reasons may be that some of those responsible comes ethics. The corporate governance should be aimed
for corporate governance are not behaving as they are at taking care and protecting the interest of all stake
expected to behave (Ethical behaviour). Their actions are holders while safeguarding the public interest. Corporate
lacking ethical current and content. Being ethical and being governance should also aim at sustainability of the
legally correct are two different aspects. Adherence to law organisation.
is the minimum requirement because legally correct decision
may be unethical. Any business organisation has many Customers' rights of safe and transparent business needs to
stakeholders and being ethically correct means being loyal be protected. Retail customers do not have enough strength
and honest to all stakeholders. A work culture which as a stakeholder and therefore their interest needs to be
promotes not only legally correct but ethically correct too protected. Banks have become financial behemoths and this
needs to be inculcated. has led to unethical practices of cross-selling. Banks should
not compromise the needs and interest of their customers
Business/banking is carried out in a fiduciary capacity. The while pushing sales. The need for a long term relationship
fiduciary relationship between the Investor/ depositor and with customers also necessitated ethical behaviour on the
the corporates/bank demands a very high standard ethical part of business organisations.
behaviour by management and employees. The conduct of
a business organisation should be transparent and above Shareholders' interest needs to be protected by a sound
suspicion. The Board of Directors must ensure that the accounting and valuation policy. The disclosure norms under
control of the organisation is in its hand and unfettered Basel regulation have brought transparency in disclosing
decision power to individual executives without proper financial performance of the bank but a sincere effort on
control is not possible. Any kind of conflict of interest needs the part of all concerned not to hide any pertinent
to be managed in a transparent and defined manner. The information is required. Disclosure norms for other
management should set the tone of ethical behaviour from businesses need to be strengthened.

Corporates have to always do a tight rope dancing between
the interest of shareholders and interest of other stake
holders who have created wealth and value for the
organisation. The employees of the organisation are an
important stakeholder and therefore their interest is also
of much importance. Employees are looking for fair wages,
equal opportunity for growth and a safe &conducive work
environment. Governance and human resource practices
should not be discriminatory based on caste, creed, religion,
or faith.

The society provides the business organisations
infrastructure, resources, and consumers. Any business
organisation will survive only if the society in which it

34 | 2021 | JUNE | BANKING FINANCE