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Namaste.In the last session we had discussed Corporate Governance, the structure, the need for governanceand what will happen if there is a lack of governance.I hope you have understood remembered it, I had also asked you to check in your annualreport who are the directors of your company; I hope you have done this also look at theAGM notice that is Annual General Meeting there will be some information about boardmeetings as well.So, that was about the basics of governance.Today we look at the global models, although the corporate governance principles are globalin nature different give things are given emphasis in different parts of world.So, today’s discussion will be on that and as we have seen last time ethics is very importantpart of governance which is very much there in Indian culture.So, we will discuss about the same.Now, by far the most popular model is Anglo-US model one which evolved in US or in UK mainlyin English speaking countries, it has spread all over the world because major MNCs fromthere operate everywhere in the world and many of the regulator have adopted this model.Now, here CEO plays pivotal role, so chief executive officer is one who is looking afterthe operations is also responsible for reporting to the board is also responsible for reportingto the shareholders.Now, the capital markets are very active in US especially, so if CEO performance declinesit has a impact on the stock market performance of the company, the stock prices typicallydrop and that is a control mechanism on the CEO functioning.Now, the short term actions are very important because the appointment of CEO itself is for2 years, 3 years or sometimes even 1 year.So, the profit in that year many times in that quarter plays a very important role becauseyou know stock markets are very sensitive.The profits or the performance will have immediate impact on the stock prices not even at theend of the quarter, it happens every minute.So, the positive side or negative side in the short term becomes very important, itis very much necessary in the model that there should be active market for corporate takeovers.So, if the management team is not doing well the stock prices will fall that will bringin bad name to the company, but it does not have immediate effect on the controlling group.Because if they have reasonably high number of shares they can continue to be in chargeof the company, but because of the falling prices the company becomes a prey for somebodywanting to takeover.So, other groups may take over the company and the current management gets exposed becauseof takeover threat that is how the Anglo US model operates, that a negative performanceis penalized by reduction in prices.And. if the negative performance continuous for a longer time the whole company will betaken over by somebody else.Now, there is a agency theory which is very important for understand this model.This is a study of how to align the interest between shareholders and management theseare considered to be the most important stakeholders and you can go in there is a lot of researchwhich has happened in agency theory.Now, the major solutions given are in the form of big pay cheque.So, CEO is given substantially high salary a very high salary and also lot of perks.Now, the idea is that keeps CEO on toe.If the performance falls the person will lose out on sizeable financial benefit that keepsperson motivated, not only the CEO it is also true for senior management team they are alsogiven other benefits in the form of stock options I hope you know stock options.So, they are issued lot of shares often free of cost or at a discounted price which areconverted after some days.So, they have an incentive that if they are performing well the prices of the companywill the stock of the company will be high.Since they are getting stock at a negligible price they would be able to make a lot ofmoney.And, the third is a market for takeover which we already seen that in case of bad performancefall in the prices company becoming a easy target for take over and of course, the newgroup will kick off the current team.So, that becomes a it is a carrot and threat of carrot of a big pay cheque threat becausea poor performance will mean loss of job and loss of control on the company.Now, here is an example of how big the pay cheque is this was a recent news a may beone year old news item we know the largest bank in India is state bank of India at thattime that is in year 16 -17 it was headed by Arundhati Bhattacharya.Now, Arundhati is managing a bank as big as SBI which has a market share of 23 percentin deposit and 21 percent in advance.So, you can imagine how big the state bank is in if you look at the Indian banking industry,her salary was 28 lakhs per annum which is even less than 5 percent of salary of ICICIbank CEO at that time Chanda Kochhar was CEO of ICICI Bank her compensation was 6 croresversus compensation for Arundhati is only 28 lakhs.I am just trying to bring the difference is SBI is a PSU under the public sector the salaryis 28 lakhs even for the chairman and MD and for CEO in private sector it is 6 crore.This is not including other perks which the CEO of private sector banks get, this is notonly for ICICI I have shown you the salaries of other private sector banks.So, Aditya Puri who is incharge of or CEO of HDFC Bank we can see the salary for 2016was 9.3 then 10 crore now 9.67 crore.Remember this is excluding the perks, this is the cash salary for Chanda Kochhar it was4.79, then 6 and now you know that she is held up in a fraud, so she has been removed.In Shikha Sharma who heads Axis bank it is 3.73 4 crore 4 crore for Rana Kapoor Yes Bankagain something like 5 to 6 crore for Uday Kotak for Kotak Mahindra bank it is about3 crore.So, do you feel now wanting to join the bank as CEO that is true for CEOs of many privatecompanies and this is mainly because of US model where the top management team gets avery high salary are you getting this was just as an example.Now, there is also Japanese and German model keep in mind that these are advanced countries,but the capital markets are not as active as in US.So, the market control as envisaged in a US model or Anglo US model is not very active.Now, here instead of short term goals long term goals are given more importance and shareholdershave a more dominating roll, the chances of mergers and takeovers are relatively lessbecause there is no active market and regulators have more control they do not encourage takeoversthat easily.There is a restriction on non banking finance, so banks play a very major role in Japaneseand German companies even their corporate governance because banks are major stakeholdersthere would be a lot of control of banks or the important institutions on the functioninginstead of market control its more of a bank dominated economy ok.Now, we will go to Chinese model we know that for last ten fifteen years China is lot innews and china has acquired major market share in various types of commodities lot of productionor manufacturing activity has shifted to China.Now, in china it is a dominance of government companies now the companies which are partlyprivatized they have got tradings stocks and there are also standards of governance, butin many cases there is a duel board and it’s truly insider company insider dominated system.So, for day to day operations there will be one board there will be one senior board consistingof government party leaders etcetera who have the final say in the decision making.So, it is a dominance of a state and the minority shareholders rights are not protected theydo not have much rights and such that is a Chinese model.Now, we look at the corporate governance model in India, here by India in ancient India becausethe current model which is being practiced is mostly Anglo US model.But, from a very long time in the history we have got a model with a ethical foundationwe know that Vedic period is perhaps more than 1 lakh years old and lot of ethical foundationsor moral foundations have been laid down.So, even in prehistoric times we do observe certain government related norms and mechanismsfrom various Rigvedic hymns or in Upanishads various norms for regulation are providedfor more well documented norm if we go to Kautilya’s Arthshastra a detailed treatisehas been written about statecraft.So, though the name is Arthshastra actually it is about governance.So, lot of governance principle not only for government even for corporates or businesseshave been laid down.Now, if you look at the history records of Pataliputra which was the capital of MauryanEmpire we have very well administered city and there were properly laid down principlesof governance.Now, four important principles which are known as fourfold duties or dharma’s for the kingor any other leader even for corporate leader.One is Raksha or protection, second is Vriddhi it is enhancement not just growth also enhancement,Palana having a maintenance and Yogakshema which is safeguard having controls.So, there were fourfold duties for the leaders there are various salient ideas or thoughtswhich are there in the ancient scriptures which are very much relevant to governance.So, I have tried to list a few of them.The first one is Atmano Mokshartham, Jagat hitaya cha, so all work is an opportunityfor doing good for the world Jagat hitaya cha for the good of the world and gainingboth materially and spiritually.So, materially because you will get reward in this world you will also get reward inthe form of Moksha or in other world that is a basic principle of life.Then Atmana Vindyate Viryam, Atmana means self.So strength and inspiration for excellence in work comes from within, so divine or lordis within.So, it is not based on rewards from outside you will see in the western or in the AngloUS model its mostly the back pay cheque or some threat, but here from within VindyateViryam means from within you feel like doing good or doing selfish work that is the drivingprinciple.Tesham sukhm tesham shanti shaswati I hope you understand sukhm refers to happiness,shanti refers to peace, shaswati means infinite; infinite happiness and peace is possible fromthe taking care of others or all well beings because if we only try to get happiness keepingothers unhappy that would not be a shaswati sukhm because at some other point of timewe get hit.So, here the message is that for shaswat sukh or for infinite happiness we have to takecare of others also.Now, Yogah karmashu Kaushalam or Samatvam yoga uchyate these are two definitions ofyoga that, he who works with calm and even mind achieves the most.So, Kaushalya or the efficiency of karma depends on how much calm we are if we are able towork without getting distracted then we can perform very good our level of achieving willbe very high Yadishi bhavana yasya siddhi bhavati tadrishi, bhavana means feelings whateverfeelings you keep same way you get.So, if you have bad feelings for others you get bad things, but if you keep good feelingsfor others you get good feel good things back.So, for achieving better performance or for having a fair corporate governance peoplein charge need to have fair and good feelings not just outcome even the means are important.Parasparam bhavayantah shreyah param bhavapsyathah, so here parasparam bhavayantah parasparammeans mutual cooperation has been given very much of importance it is not just a feelingof competition western model mostly emphasizes on competition one who is the best will bemade CEO.So, managers would essentially fight with each other because they want to prove thatthey are better than others, but in Indian model lot of emphasizes has been given formutual cooperation.So, nowadays world is slowly moving towards team spirit that as a team we need to performbetter because if company has to be good then as a team we need to be good.So, that particular thing comes from this principle like that we can have lot of principleshave, but I have just tried to list a few of them.Now, these are basic values of Indian principles of governance.Human beings are given lot of importance because an individual has a immense potential, energyand talent for perfection there is no limitation for how well the human being can achieve.There is a holistic approach because unity of individual and universe is a starting pointin the Indian concept.So, it is not a fight if we try to disturb others we also get disturbed that is a holisticapproach this is useful within the team also and between the corporates and other entitiesor stakeholders as well.Now, the subtle and intangible subjects are extremely important as much as tangible objectsnow if you look at the balance sheets of the companies all over the world say 100 yearsbefore that tangible assets where most important.Now a days the intangible assets are becoming more important because, of the knowledge societyactually our ancient scriptures or Shasta’s had emphasized it thousands of or perhapslakhs of year before that one needs to develop third eye or gyaanachakshu one needs to developwisdom the inner resources are as much important perhaps more important like than outer resources.Outer resources are in the form of capital or land of plant and machinery, but to usethem effectively you need inner resources if you have got inner talent the outer resourcescan be raised.And the last point which we already discussed is about cooperation, that cooperation isa powerful instrument for teamwork and the success of any team or any enterprise verymuch depends on the collective work that does not mean individual achievement is not important.But, it should be supported by teamwork then one can perform consistently for a long periodof time are you getting.So, these are the important principles we have tried to compare various global models,we have a US model or Anglo US model which emphasizes on CEOs role lot of perks and salaryis to CEO.The second is German or Japanese model which is more of a bank based, the third is Chinesemodel which is more straight driven, the fourth one which we discuss is a Indian model whichis more of ethics and moral driven that it is not a regulator from outside, but it isfrom within you feel that you should perform in a fair manner.So, emphasis on self regulation nowadays the world is slowly coming to understand importanceof these concepts like self regulation or team spirit or having the need of fairnesswithin and so on.So, with this will stop here.Namaste.