1.

“If we are now aware of the major charges of governance

failure at reliance, it was only because Mr. Anil Ambani had chosen
to make them public”. Was Anil Ambani performing the role of a
whistle-blower trying to safeguard the shareholder interests?

Although Anil Ambani had chosen to make the major charges of governance
failure at reliance public it was not because he was performing the role of
whistle-blower. Anil Ambani joined the company in 1983 as Co-Chief
Executive Officer. The charges of government failures were definitely not a
day’s event. It was cropped up in years and Anil Ambani being associated
with the company for so long was definitely part of it.

Clause 49has put the whistle-blower policy under the non-mandatory

requirements . Companies have to present the whistle-blowing mechanism
installed in their annual reports. Whistle blowers shall be provided access to
the audit committee and if necessary to the Chairperson of the audit
committee. Instances of whistle-blowing have been there in India but most
of them have been instigated. Mr.L.C.Gupta, a former member of SEBI
hailed Mr. Anil Ambani as “An unusual whistle-blower” while writing about
the issues that were raised by Anil Ambani during the sibling-rivalry days in
the pre-demerged Reliance Group. Gupta wrote that “It is a rare case of
whistle-blower emerging from a company’s top management cadre”( Gupta
L.C., “An unusual whistle-blower”, Economic Times, May 5, 2005).While
there is nothing wrong about somebody from top management level blowing
whistle if some frauds or unethical practices happen in the company. But,
Reliance had been involved in many issues of violation of rules and
regulations during their growth phase during eighties and nineties, and Anil
was very much a part of it, no such issues were raised or discussed by him
in public. Hence, while he might have done the right thing by pointing to
various issues and refusing to sign the accounts for 2004-05, there is all the
reason to believe that this was the result of the eruption of rivalry between
him and his brother Mukesh Ambani with respect to the control of the
Reliance group.

During the tussle of corporate governance issue, Anil has made an issue of
what the perceived to be a conflict of interest between the business interest
of Anand jain, a close associate of Mukesh, and various key positions he
holds in the group. Anil has even resigned as vice-chairman and director
from the board of Reliance group company IPCL. Anil had virtually turned
down saying IPCL’s request to reconsider his resignation, saying various
issues including corporate governance and disclosure need to be resolved
before any rethinking on his decision. Requesting appropriate steps in the
interest of 3 million share holders , Anil expressed “deep concern that RIL
has failed to adhere to highest standard of corporate governance,
transparency and disclosure”

Here Anil Ambani plays the role of a good whistle blower, but it is to
safeguard the interest of share holders but to safeguard his interest,
because RIL board continues to pretend that nothing is wrong.

2. “The Reliance case proves what experts of corporate governance

have been saying. Corporate governance cannot be imposed alone
by law or by the regulator. It has to be practiced by the people at
the top of the corporate bodies so that it could percolate down to
the bottom.” Offer your comments on this statement.

I totally agree with the statement made above. Corporate Governance

cannot be imposed by law or by regulator. It has to be practiced by people
at the top of the corporate bodies so that it could percolate down to the
bottom. A corporation is a congregation of various stakeholders, namely,
customers, employees, investors, vendor partners, government and society.
A corporation should be fair and transparent to its stakeholders in all its
transactions. This has become imperative in today’s globalized business
world where corporations need to access global pools of capital, need to
attract and retain the best human capital from various parts of the world,
need to partner with vendors on mega collaborations and need to live in
harmony with the community. Unless a corporation embraces and
demonstrates ethical conduct, it will not be able to succeed

Managing well depends on internal and external factors, the latter include
availability, cost effectiveness; technological advancement. Increasingly,
revelations of deterioration in quality and transparency, have called for
adoption of internationally accepted ‘Best Practices’. The acceptance of the
concept gave rise of ‘Corporate Governance’. ‘Corporate Governance’
encompasses commitment to values and to ethical business conduct to
maximize shareholder values on a sustainable basis, while ensuring fairness
to all stakeholders including customers, employees, and investors, vendors,
Government and society at large. Corporate Governance is the system by
which companies are directed and managed. It influences how the
objectives of the company are set and achieved, how risk is monitored and
assessed and how performance is optimized. Sound Corporate Governance
is therefore critical to enhance and retain investors’ trust.

Corporate governance is about ethical conduct in business. Ethics is

concerned with the code of values and principles that enables a person to
choose between right and wrong. If the people at the top are practicing the
ethical conduct then only the other employees are motivated to do the
same, this only gives rise to the good Corporate governance in the
Corporate body. Corporate Governance is nothing but the moral or ethical or
value framework under which corporate decisions are taken. It is quite
possible that in the effort at arriving the best possible financial results or
business results there could be attempts at doing things which are verging
on the illegal or even illegal. There is also the possibility of grey areas where
an act is not illegal but considered unethical. These raise moral issues.
In fact, the very definition of corporate governance stems from its organic
link with the entire gamut of activities having a direct or indirect influence
on the financial health of corporate entities. The Cadbury Report (1992)
simply describes Corporate Governance as ‘the system by which companies
are directed and controlled’. So far as corporate governance is concerned, it
is financial integrity that assumes tremendous importance. This would mean
that the directors and all concerned should be open and straight/forthright
about issues where there is conflict of interest involved in financial decision
making. When it comes to even the purchase/procurement procedures,
there is need for greater transparency.

Corporate Governance is important for following reasons:-

a) The liberalization and de-regulation world over gave greater freedom in
management. This would imply greater responsibilities.
b) The players in the field are many. Competition brings in its wake
weakness in standards of reporting and accountability.
c) Market conditions are increasingly becoming complex in the light of
global developments like WTO, removal of barriers/reduction in duties.
d) The failure of corporate due to lack of transparency and disclosures and
instances of falsification of accounts/embezzlement and the effect of such
undesirable practices in other companies.