Leading NRI industrialist Lord Swraj Paul said Thursday that adherence to a robust and rigorous corporate governance practice is needed in India more than ever.
"The recent crash of IL&FS is in my view a complete failure of corporate governance," Lord Paul, Chairman of the Caparo Group, said while addressing the 18th London Global Convention of the Institute of Directors - India here.
IL&FS has defaulted on payment of loans to SIDBI and along with its subsidiaries has a combined debt of over Rs 91,000 crore. There were concerns that default by a large NBFC like IL&FS would create liquidity crunch in the financial markets.
The Indian government has taken over the crisis-hit IL&FS Ltd's board, saying it impacted the entire nation's economy.
"Effective corporate governance must underpin our approach and we must not tolerate anything else," he said, adding that robust governance lies at the heart of all progressive democratic governments and societies.
Lord Paul said it saddens him to read about the number of companies that are entering bankruptcy proceedings because they have either over-borrowed or are unable to meet repayment terms.
"Not only are companies failing but even the banks are also suffering mainly due to their own poor corporate governance. This is a bad recipe and one that will undermine the advancement of the Indian economy and the wellbeing of its citizens," he said.
The issue is not just restricted to India of course but it is people "such as you" that have the ability to do something about it, he told the directors.
Lord Paul said that effective corporate governance is nothing without a motivated and productive workforce and one that is internationally minded in its outlook.
"When individuals see the world from a wider global perspective, then it will benefit them, you and wider society as a whole. Of course the workforce must be educated and education must also be at the core of the approach," he said.
Noting that education should not be limited to a field, Lord Paul said that is why at the University of Wolverhampton where he is the Chancellor, "we are determined to provide opportunities for all through a wide-ranging educational experience that will ultimately ensure that students are fully prepared for life after university".
At the outset, Lord Paul congratulated General Ahluwalia, head of the Institute of directors, India and his colleagues for the great work they do to highlight and promote the importance of sustainable corporate governance in India.
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