Voices of Change 6: Sandeep Manakeshwar, Certified Independent Director & CSR expert
Sandeep R Manakeshwar is a senior mining professional and CSR expert. He is currently AGM at MSPL Ltd
Our team spoke to him recently on corporate governance and independent directorship. Here are the excerpts from the interview:-
- As a senior mining professional & certified independent director, what are your views on how independent directors can improve corporate governance practices?
Independent Directors should maintain their independence & their role does not involve any reporting relationship with anyone, but act as conscience-keepers of the boards, vigilant watchdogs, protectors of the interests of minority shareholders as well as other stakeholders and implementers of regulatory norms. They have the option to abstain from voting on an agenda or express dissent if needed.
In my view, if a planned and strategic role along with the Board Members is played by an Independent Director, it will help boost the Corporate Governance Practices. Some of the actionable points on improvement are:
· Impartiality and Unbiased Judgment: Independent directors are entrusted with providing objective and unbiased insights into the company’s operations, strategies, and financial matters. Their impartiality is crucial in ensuring that decisions are made in the best interest of all stakeholders.
· Audit Committee: As majority of the members of the Audit Committee are independent directors, they play a very important role in ensuring good corporate governance in the company. Being independent, they can expressly review and monitor critical audit and financial transactions including related party transactions aspects for the benefit of the company
· Minority shareholder participation in Independent Director Selections: Minority shareholders should select Independent directors who will be truly independent (of management and controlling shareholders) and hence accountable to the minority shareholders. They will then be able to obtain knowledge about various policy decisions that are being discussed on the board.
In India, most of the huge corporation’s shareholders are either individuals or family members, which means the appointment of ID’s lies with the relatives or the Family Members.
· To promote Ethical Culture in the Organization, Independent Directors should ensure a Strong Whistle-Blower Mechanism in place to enhance Corporate Governance Standards.
In conclusion, the objectives of corporate governance cannot, perhaps, be as effectively met without the inclusion of independent directors in the larger scheme of things.
Clause 49 SEBI should also remind directors that they are fiduciaries to shareholders; hence, continuous efforts should be made to make them more accountable. The inclusion of independent directors is a check on company management as an oversight mechanism that helps improve Corporate Governance Practices.
2) You are an experienced CSR professional. Please share your contributions as a senior leader.
I have been working for the Mining Industry for the last 15 years, and presently looking after the projects in Karnataka Sector. I would like to highlight the fact that the Mining Industry is generally located in mineral-rich areas in the hinterlands of the country. These places are usually under-developed and local villagers mostly depend on the Government Schemes for Agriculture, Education, Health, Employment of Local youths, and many others for their upliftment.
In many cases due to a shortage of Government funds, aid doesn’t reach the Far-flung areas of the Country, which puts Local Industries on the Forefront of Corporate Social Responsibility (CSR). This is a Win-Win Situation for the Companies since it mitigates the reputational risk, operational risk, and regulatory risk and increases public acceptance of mines. It also fits in the sustainable framework of the Company.
Under the Mines and Minerals (Development and Regulation) Amendment Act, 2015 separate District Mineral Foundation (DMF) is set up by the respective State Governments in Districts affected by Mining Works. It is also christened as Pradhan Mantri Khanij Kshetra Kalyan Yojana. The mining companies are required to pay DMF 30% of the royalty amount for leases granted before 2015 and 10% for leases granted through the auction mechanism post-2015.
Since Mines come under the ambit of Stringent Regulatory Frameworks, every Mining company apart from contributing to the DMF Funds, carries out their own CSR works which help them build Strong Relationships with the Local Community and in turn enhance the Brand Image of the company.
Some of the Grey areas of the Community, which the CSR team had identified and required special care and attention are:-
· Promoting preventive health care & sanitation, making available safe drinking water
· Health camps which include the conduct of Jaipur Foot Camp: to help physically challenge people to lead a normal life with social dignity and respect, in association with Bhagwan Mahavir Vikalang Sahayata Samiti Jaipur, conducted Jaipur foot artificial limb fitment.
· Eye screening & surgery camps: To create awareness about eye health and to prevent eye diseases among the villagers, in association with Private Eye Hospital, the CSR Team conducted Eye screening camps in villages.
· Furniture for Primary Health Centre: Primary Health Centers (PHCs) act as the first line of defense in preventing and controlling communicable diseases such as malaria, tuberculosis, and other infectious diseases. They play a pivotal role in the early detection, diagnosis, and treatment of these diseases, thereby reducing their spread within the community. Hence, to enhance the basic facilities of the Primary Health Centre to serve the community, the Organization provided furniture for PHC.
· Promoting education, including special education and employment enhancing vocational skills
· Scholarship for Girl student’s Education: In Rural Areas, many young School Girls drop out of College due to insufficient funds or they join daily wage jobs due to parental pressure to help earn livelihood for the family. CSR team counseled many parents & brought back their children to Schools and Colleges. This was done by providing Scholarships to Girls for continuing education in their areas of Interest.
Most of the CSR activities carried out were based on the needs of the Society and generally neglected under the Government Schemes. Making CSR policy a core activity of any Industry helps gain Societal Approval for running the Business and it can strategically build a relationship with a local community and help enhance the Brand Image of the Company.
3) How can overall board governance and board leadership be enhanced in the Indian corporate world?
To strengthen corporate governance in India and restore trust in the business sector, it is critical to identify and fix the system’s present flaws and inadequacies. The following are key areas that demand attention:
· Improving board effectiveness and accountability: The makeup, structure, and operation of boards are crucial in establishing good governance practices. Efforts should be made to foster board diversity, independence, and competence, as well as a thorough review and succession planning process.
· Improving shareholder rights and engagement: Empowering shareholders and ensuring their active participation in decision-making can result in improved corporate governance outcomes. Strengthening minority shareholder protection and increasing shareholder participation can aid in improving governance practices.
· Protection for minority shareholders: Minority shareholders should be protected and treated fairly, with equal access to information, voting rights, and the opportunity to participate in general meetings. Minority shareholders should be protected from unjust related party transactions that benefit majority shareholders at the expense of minority owners.
· Promoting openness and accountability: Shareholder activism can put pressure on corporations to adopt better governance practices, resulting in increased transparency and accountability. Activist shareholders can draw attention to crucial issues such as environmental, social, and governance (ESG) concerns and pressure firms to address them more effectively.
· Policy changes and regulatory reforms: Regulators should conduct regular evaluations of existing corporate governance legislation to guarantee their continued relevance and consistency with global best practices. These audits can aid in the identification of gaps, the mitigation of new risks, and the adaptation to changing corporate contexts.
· Auditor independence should be strengthened: Regulators should enhance standards controlling auditor independence and rotation to guarantee that auditors maintain neutrality and give unbiased judgments of a company’s financial reporting.
Companies should ensure that their audit committees are constituted of independent directors with relevant knowledge and are empowered to properly oversee the financial reporting process, risk management systems, and internal controls.
The foundations of good corporate governance are strong board Leadership, Composition, and Structure. A diverse and independent board is essential for sound decision-making because it brings a wide range of viewpoints, experiences, and expertise to the table.
These are several areas where Board Leadership needs to be Strengthened for Effective corporate governance:
· Independence of Board: Independence of the Board is an essential value for a board’s effectiveness in achieving strong governance. Companies must foster this independence, as it can help prevent possible conflicts of interest, improve objectivity and impartiality in decision-making, and discover new perspectives for strategic decision-making. This, in turn, helps ensure the short- and long-term interests of the company.
· Diversity, Equity, and Inclusion: Companies should emphasize the value of diversity in boards of directors and senior management positions, as this will also allow them to have different perspectives and experiences to make better decisions. In addition, diversity contributes to greater innovation, creativity, and flexibility
· Stakeholder Governance: Boards of directors and senior management must consider the interests of their stakeholders when determining the values, strategy, and general direction of the company. A good relationship with them is key to determining the business’s success.
· Sustainability: Boards of directors must emphasize their sustainable actions with clear agendas and measure the effectiveness of their results so these practices go beyond marketing. All of this requires strong corporate governance that is aware of its impact and committed to acting sustainably.
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