Different Types of Affiliates
Affiliate marketing has been around for a couple of decades now. Obviously the industry has grown as incumbents have started utilizing newer techniques to perform better. Over a period of time, a whole ecosystem of affiliates has evolved. Affiliate marketing, now is no longer a simple choice. Instead, it is a complex business wherein companies […]
Leaders Do Things Differently
AT&T Universal Card Services entered the credit card market at a time when the market was mature and there were numerous retail banking companies dealing with credit cards. In such a situation, the company chose to introduce their credit card with a competitive edge over competition. Against a market where in customers were paying huge […]
What is Auditing, Its Types, Purposes, and Some Current Issues
What is Auditing? Auditing is the process of assessment and ascertaining of financial, operational, and strategic goals and processes in organizations to determine whether they are in compliance with the stated principles in addition to them being in conformity with organizational and more importantly, regulatory requirements. Indeed, among the objectives of auditing as mentioned above, […]
Need for a Uniform International Corporate Governance Code
With the globalization of the world economy starting in the 1970s, continuing through the 1980s and accelerating since the 1990s reaching its zenith in the first decade of the new millennium, there has been a concomitant trend of global corporations expanding their international footprint and operating in multiple countries around the world. This meant that […]
What is Brand Loyalty and How to Develop It
Brand Loyalty is a scenario where the consumer fears purchasing and consuming product from another brand which he does not trust. It is measured through methods like word of mouth publicity, repetitive buying, price sensitivity, commitment, brand trust, customer satisfaction, etc. Brand loyalty is the extent to which a consumer constantly buys the same brand […]
With the explosion of scandals pertaining to corporates due to mismanagement and fraud in recent years, the regulators all over the world have been implementing a series of policies aimed at improving corporate governance and ensuring that companies follow ethical and normative rules of business. A part of this initiative has been to goad the companies to nominate a certain percentage of their board to persons who are not affiliated to the company. These are the so-called independent directors who sit on the boards of companies in a purely professional manner without having a hand in the day to day running or other activities of the company.
The point about the independent directors is that they are drawn from a pool of professional who have had wide industry experience and are qualified to sit on the boards of the companies. What makes this process appealing to the regulators is that these independent directors can bring the much needed perspective that is objective and balanced since they are not connected to the company nor its management and hence do not have hidden agendas.
In India, SEBI and the Corporate Affairs Ministry have decreed that between 10-15 percent of the composition of the board must be made up of independent directors. This move is aimed to bring in more objectivity to the art of corporate governance and introduce transparency and accountability from the directors who are drawn from the ranks of the management. This rule has been enforced given the spate of corporate scandals like Satyam where the top management itself indulged in fraud and dubious business practices. So, the line of thinking goes that bringing in independent directors would usher in greater oversight over the functioning of these companies. Since the Satyam Scandal was because of the board looking the other way when its founder was indulging in defrauding the company, the Ministry of Corporate Affairs is implementing this rule to introduce greater oversight.
In the US, independent directors have been known to bring in a fresh perspective as well as check the runaway business behavior dictated by profits and personal benefit. In many companies in the US, the independent directors are the ones who often thwart the management from taking decisions that are based on personal benefit as opposed to the interests of the shareholders. Further, independent directors are tasked with investigating cases of corporate malfeasance and unethical behavior because of their supposed objectivity. However, there have been instances where the independent directors themselves acquiesced in the wrongdoings of the companies and their boards. The solution to this has been the initiative to make the independent directors responsible for the actions of the board so that they have a stake in ensuring that the board does not tread on the wrong side.
Finally, independent directors also bring in the much needed professional expertise since they are individuals with wide experience in running companies as well as the fact that they sit on the boards of other companies which means that they are abreast of the latest happenings. There has been a move by the regulators in many countries to ensure that independent directors do not have conflicts of interest and these have been codified into rules governing how many companies they can associate themselves with and the sectors and industries that they represent.
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