Standards for Governance & their impact on society

1. Standards for Governance & their impact on society S Radha, Addl Director DIQA, Bangalore DGQA/ Min of Defence 22 Jun 2011

2. Theme • Need for Good governance • What is “Good organizational governance” • Elements, aspects, criteria, best practices • Need for Standards for governance • Proposal for standards • Impact on the society

3. Organizations – Success & Longevity 1847 1830 keiunkan.co.jp Year 705 AD Levi Strauss & Co 1829 1586

4. Satyam's Raju brothers arrested by AP Police • ET Bureau Jan 9, 2009, 11.00pm IST Need for good Governance

5. Good to Great • Why some organizations successfully transcend generations & centuries? • How some organizations help build wealth of their country as a whole • How individual decisions of those at the helm impact financial stability of countries or even world economy? • What drives sustainable economic growth, employment & standards of living of citizens? Good is the ‘ENEMY’ of Great * * Jim Collins

6. What is Good Organizational Governance

7. Organizational Governance • Defines & implements processes, structures & relational mechanisms in the organization • Enables organizationto execute its responsibilities in support of it’s strategies & objectives

8. Governance - elements

9. Governance – drivers • Leadership • Behaviour (culture & values) • Ethics • shared values of the members of a community

10. Leadership • Selflessness: Interest of stakeholders • Integrity: Not under obligation of those bearing influence on organizational functions • Accountability: for decisions and actions taken, to stake holders • Openness: information to stakeholders • Honesty: Avoiding conflict of interest

11. Value system & Ethics • Value system • Internalized code of conduct stemming from synergy of expectations • Ethics • Obedience to unenforceable • At Macro, Organizational & Personal levels

12. Organizational governance framework • Compliance to legal & regulatory requirements • Setting, deploying & communicating Vision & Values • Determining code of conduct • mechanisms for institutionalization • measures & monitor • response to breaches • Creating organizational culture • Ethical compass while taking decisions • Determining accountability for actions & decisions • Defining disclosure policies & practicing transparency in operations

13. Sustaining Good governance • Defining organizational value framework • Decision making • Quantification & Automation • Internal performance assessment • External audit • Establishing roles of stakeholders, governments, self & regulators in line with societal norms • Using an ethical barometer test during recruitment of personnel • Training employees & educating general public • Using Ethical Compass as decision making tool “How will the people who matter most to me, reading the newspaper, think & feel?” “Will I be able to sleep easily at night having acted this way”?

14. Decision making filters • Organization must define framework for criteria in decision making commensurate with value system START NO Does org policy allow Is it Legal? Check with Superior Check with superior Don’t know Do Not Do YES NO YES NO Within personal values YES

15. Good Governance - Indicators • Performance evaluation of leadership • possible impact on society while defining objectives, management actions, products and processes • evidenced through internal controls, peer reviews, performance reviews, stakeholder feedback • Ethical behavior • Instances of ethical breaches and responses • Results of survey on workforce perceptions of organizational ethics

16. Good Governance…. • Results of governance • Alignment of objectives with stakeholders’ preferences • Enforcement of transparency & accountability • Resultant quality of life • environment conducive for working without fear or favour as assessed by employee surveys, 360◦ feedback & commitment to improve • Independence of the audits

17. Standards for Governance

18. Governing Standards What Next?

19. Standards for governance • Provide a metric to guide & gauge behaviour. • To be backed by effective means to ensure compliance • Need to be formulated through working groups • Draw strengths from current standards

20. Recommendation for Standardization

21. Criteria for standards • Policy & objectives • Identifying stakeholders & their aspirations • Statutory & regulatory requirements in vogue • Constitution & responsibility of Board of governance • Building organization with people of aligned value system • Code of conduct & institutionalized practices • Define Rule of the game • Performance assessment framework • value system preferred to short term results

22. Codes of Conduct • Intolerance to discrimination • Supporting & respecting human rights & ensuring same from partners • Recognizing employees’ rights • Fearless reporting of misbehavior & misdeed • Refusing to accept & tolerate harassment • Open, honest & direct in dealings • Not using & allowing use of organization’s assets for personal requirement • Records depicting underlying transactions accurately & truthfully • Signing records only after ensuring their accuracy & truthfulness • Defining when & what to accept and give as “gifts”

23. External Audit • By independent, competent & qualified auditors • provide objective assurance to stakeholders that results reported fairly represent performance of organization in all respects. • Accountable to shareholders • Responsible to organization to exercise due professional care in the conduct of audit.

24. Impact on Society • Corporate failures indicate bad governance & unethical practices • distrust among share holders • distress for the employees • Weakening economic system • Good governance leads to • sustained organizational excellence • happy & committed stakeholders • shared ethical conduct of organization & all stakeholders • cascading effect on community at large.

25. Thank you