Governance and sundry musings
Governance is a weighty word.
Folks across the world have spilled copious quantities of ink and pixels on this subject. Just search the word ‘governance’ on Google and one will find 261 million references that pop-up in 0.6 seconds.
So, what does governance mean? That’s precisely the question I posed to TV Mohandas Pai, former CFO and Director HR of Infosys.
In the early 2000s, Mohandas, Mudar Patherya (former colleague and India’s finest cricket writer) and I were sipping coffee in Calcutta’s Park Hotel.
Mohandas was a star.
Infosys revolutionised the language on corporate governance in India and NR Narayana Murthy, the Infosys Board and Mohan lead that transformation. Infosys was publishing its financial statements in six different languages, explained its business through an exhaustive management discussion and analysis, reported on the US GAAP and basically, heralded a new vocabulary on financial disclosures and governance in India.
Back to my question to Mohandas. Without so much as blinking, he replied: ‘the best word that defines governance is present in the Urdu lexicon’.
‘Niyat’, he said’.
Urdu for intention. Or the purpose and aim while pursuing any activity. Simply put, the objectives of governance.
Mohandas in his Bengaluru-meets-Boston accent articulated that one does not need long-winded set of rules and documentation to foster a culture of good governance. One just required to possess and display the right intention, or niyat. At that moment, I felt the definition was simplistic. Even naïve. But was it, really?
Collapse of governance
Here’s an example. Enron and Arthur Andersen. Andersen was a global giant and part of the Big Five of accounting firms and was found guilty for malpractices in connection with Enron’s financial statements.
In 2001, Enron went bankrupt and Andersen was indicted of malpractices and had to shut shop. Here is the kicker: In the year 2000, Enron was nominated by Fortune Magazine as the ‘The most admired company in the world.’ Never had we witnessed a more accelerated collapse than the Enron-Andersen train wreck.
Examine the irony of the situation. Most admired to bankrupt in 12 months. And Andersen that was required to maintain probity was indicted. Did the duo not have the best-in-class documentation on governance and its rules? Of course, they did. But what did they lack? You guessed right — ‘niyat’.
Governance and non-profits
What does this have to do governance in non-profits? Answer: Everything.
Governance is an important word for non-profits because financial contributions are made by philanthropists and charity-givers for nothing tangible ‘in return’. Donors expect their contributions to be managed well and for organisations to be built on strong and sustainable practices.
Things have gone astray in the non-profit world as well. Key folks in Red Cross were found guilty of embezzling and squandering public funds. Boy Scouts of America was levied with serious charges of sexual misconduct. And the Trump Foundation raised funds for veterans but used them to settle personal legal disputes.
In light of the above, let’s pose key questions to ourselves and analyse how we would address them should the situations arise.
A representative list could look like:
1. How often do we communicate the bad and tough news honestly to our donors, boards and teams?
2. Are donors, boards and teams adequately equipped with understanding of risks and threats to the organisation?
3. Is there an honest conversation around financial solvency and sustainability?
4. How are board and team members appointed? Are they friendly, ‘you-scratch-my-back-and-I-scratch-yours’ cliques or appointed for competence?
5. What is the practice and behaviour of allowing rational and dissenting voices in boards and teams?
6. When was the last time a powerful and well-performing team member was let go due to malpractices or wrong behaviour?
7. How often have fundamental principles of the organisation been shifted to accommodate external requests? (Polite speak for ‘how often has one compromised core principles’?)
8. What is the role of family members in decision making at the board and senior administration levels? Again, a euphemism for ‘is the organisation being run like a lala-ka-dukaan’. Or, like Rana Kapoor of Yes Bank put it eloquently — Yes Bank was not ‘Kapoor-di-hatti’ — but hell, it was, and the man is currently in prison.
9. Is leadership — both board and administration — a musical chair between the usual suspects or is there an adequate infusion of bright, young and diverse talent?
10. What is the existing and potential conflict within the board and administration? Have strong steps ever been taken to resolve them?
Elements of governance
Simply put, governance is action not documentation. Remember, Britain does not have a written constitution but governs it’s 67 million population admirably well.
Not very long ago, my boss and I were in a conversation with an extremely successful entrepreneur raising funds. The prospective donor agreed to a Rs 10 cr grant but asked for admission for his son. Before I could venture a reply, the boss dived in and said — ‘yes, we need your support but admissions are conducted purely on merit’. Needless to add, the grant did not materialise. Two more instances: a prospective donor wanted to join as Trustee but sought voting / veto rights when future Trustees would join. Risk alert: these are early signs of formations of cliques. Another donor requested additional voting rights for making a large grant. The offer was declined as it violated the ‘One Trustee, One Vote’ principle.
That is governance demonstrated by action.
The question of trading admissions for monies or influence has been a recurring theme year-after-year. Subtle and not-so-subtle buttons have been pressed testing the institution’s core principles as we stood steadfast. The quantum of funds we have walked away from could have funded a few families into posterity.
That is governance demonstrated through consistency.
And like every discipline in life requires practice, one needs to practice governance every single day. It needs to become a way of life. Only then can a culture of strong governance become the DNA of an organisation.
Here is a formula that may stand us in good stead:
Governance = niyat (intention) x action x consistency.
And the next time a discussion ensues on governance, evaluate the argument on the above three parameters.
Venkat Eshwara is Vice-President, Development and Alumni Relations, Ashoka University. Venkat has been with Ashoka for eight years and prior to that, spent 21 years in building and growing start-ups in financial services and related sectors.