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Board as a Strategic Asset – Company Secretary, The Custodian

Board as a Strategic Asset – Company Secretary, The Custodian. Ravi Kastia Group Executive President & Business Head Aditya Birla Group 05 th November 2009. Contents. Turbulence in Global Economy Board of Directors as a Strategic Asset Company Secretary as a Custodian

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Board as a Strategic Asset – Company Secretary, The Custodian

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  1. Board as a Strategic Asset – Company Secretary, The Custodian Ravi Kastia Group Executive President & Business Head Aditya Birla Group 05th November 2009

  2. Contents Turbulence in Global Economy Board of Directors as a Strategic Asset Company Secretary as a Custodian Managing Growth in Turbulent Times

  3. Turbulence in Global Economy – 2008 Prices peaked and collapsed across asset classes Sub-prime crisis spreads globally Credit markets seized post Lehman collapse Distress sale of stressed companies Unprecedented Government bail-outs Banks forced to de-leverage Major developed economies slipped into recession Unemployment rates increased

  4. Turbulence in Global Economy – 2009 Unprecedented global monetary and fiscal stimulus Growth has rebounded in emerging economies Major economies coming out of recession Asset prices have rebounded from 2008 low levels De-leveraging process continued Significant belt tightening in the first half Focus on Corporate Governance

  5. Where do your Board Stands ? Source - Deloitte

  6. Board - A Strategic Asset Members have requisite experience Members are placed in appropriate roles Roles are clearly defined and deliverables understood There is effective group dynamics Purposeful dialogue occurs in Board meetings Independent Directors contribute Information is shared in time with members Assessment mechanisms are in place to evaluate effectiveness

  7. Role of Board as a Strategic Asset Board as a Strategic Asset plays a role towards ensuring • Management strategy is grounded in reality • Management decisions are well thought out and based on balanced perspectives • Shareholder and Stakeholder value continues to increase • Robust Corporate Governance structures are in place and functioning • One individual or faction within the Board cannot steer the Board’s and the organization’s efforts too far in one direction The enormous uncertainty in today's environment makes strategic intervention in stakeholder value management all the more important for the Board

  8. Role of Company Secretary Source - ICSI

  9. Role of Company Secretary - The Custodian As a Custodian, the Company Secretary "protects the value" that the Board "creates" by – Ensuring Corporate Compliance Developing good governance structures Coordinating the functioning of the Board Ensuring ethical corporate practices Facilitating smooth communication between the Board and Management Providing administrative support to the Board Effective functioning of Company Secretary ensures that Board of Directors can focus on important business issues and not on peripheral issues

  10. Role of Company Secretary - The Custodian An effective Company Secretary: Ensures good Corporate Governance Maintains confidentiality, accountability and independence Ensures fool proof documentation Safeguards assets and properties of the Company Optimizes utilization of Board’s expertise and competence Behind great corporate progress – there is a strong backbone –the Company Secretary

  11. Case Studies 1 - Infosys Board comprises of Eight independent directors of a total 15. Institutionalized concept of lead independent director with clear mandate of responsibilities Robust criteria and framework for selection of independent directors Clear demarcation of responsibility and authority of the Board Retirement Policy Board Compensation Policy First Company in India to be assigned the highest Corporate Governance Rating (CGR) by ICRA

  12. Case Studies 2 – Apple Inc. Transitioned from niche player in low growth low margin Computer market to Consumer Electronics major Key Strategy of the Board – Innovation and Sustained Value Creation Product Innovation -iPod and iPhone Business Model Innovation – iTunes online music service was something that had eluded music industry for years Innovation helped the company to become a player at the centre of a market 30 times its original market Apple has comprehensively beaten the current market downturn Source - BCG

  13. Case Studies Contd…. When the Board fails ?? Board failures will in all likelihood result in the company’s demise Enron saga: Enron's audit committee reportedly didn’t have the technical knowledge to properly question the auditors on accounting related to the company's special purpose entities. Radio Corporation of America fiasco: Board judgment on investments into television networks and electronic products turned into heavy money losers, eventually bringing the company to the brink of collapse Pan American Airlines disaster: Board could not manage the airline market dynamics

  14. Managing Growth in Turbulent Times 5. Manage Risk 6. Formulate Strategies for Growth 4. Rationalize Capex Turbulent Times 7. Stay Focussed 3. Debt reduction 8. Strengthen Corporate Governance 2. Cost Optimization 1. Conserve Cash

  15. Thank you!

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