Natco Pharma, Thejo Engineering winners of Moneylife Foundation’s 1st Corporate Governance Award

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Hyderabad-based Natco Pharma Ltd and Chennai-based Thejo Engineering Ltd are the winner and runner-up, respectively, of Moneylife Foundation’s inaugural Corporate Governance Award.

In an online function, M. Damodaran, former Chairman of SEBI, announced the winner and runner-up from five shortlisted nominees. The five finalists for this year’s award were KPR Mill Ltd, Laurus Labs Ltd, Natco Pharma, Suven Pharma Ltd and Thejo Engineering.

Congratulating all the shortlisted companies, Damodaran said, “What gives me the greatest happiness is that in a universe of companies, big and small, we do not have any of the usual suspects in the shortlist by Moneylife Foundation. This also shows, perception management lasts only for some time and then the truth takes over, like what happened in the case of Satyam Computers.”

According to the former chief of SEBI, companies stand or fall depending on their boards.

“Size is not the real indicator but the kind of people that get into the board. If a promotor has courage to bring into boardroom people who can ask tough questions, no board will extract value from management and vice versa. Peaceful co-existence does not work in board rooms,” he added.

Damodaran also expressed anguish over the introduction of newer regulations for each delinquency by a company.

He said, “Before new regulations are introduced, they must be analysed if better enforcement of existing regulations can address the problem. Before you write new regulations, do a cost benefit analysis and regulatory impact assessment. Most importantly all regulations must have a sunset clause, else you cannot take away redundant regulations. It should be done like what Reserve Bank of India (RBI) has been doing. RBI withdrew 104 regulatory instructions and circulars that have become redundant or were duplicated as per the Regulations Review Authority’s interim recommendation (RRA). Why this cannot be followed by all other regulators?”

“What Moneylife Foundation has done for recognising good corporate governance is a great first step. However, I would suggest you to have an award also for the best and most informative annual reports for companies. At present annual reports are full of complex sentences, and in a language that is difficult to understand for a common investor. Language is used to conceal thoughts, and we should identify people who do this. Communicating in simple language is important,” he added.

Damodaran requested organisations like Moneylife Foundation to raise voice against absenteeism in company board meeting by directors.

The former SEBI chief also raised the important issue of representation of women independent directors on the company boards.

“Are companies appointing women independent directors or independent women directors? There are only directors on a company, not man or woman directors. Are women being appointed on company board because of their talent or as tokenism? Most are doing it to just tick the regulatory check box. Some claim they are doing to give justice to talent of women, but why they took so much time to recognise the talent and board resolution,” he asked.

Accepting the award as winner, Rajeev Nannapaneni, Vice-Chairman and Chief Executive Officer of Natco Pharma, said, “Most investors look at quarterly performance. That pressure leads to decision making to please the gallery or force companies to make mistakes. That is what causes the mismatch. You cannot build business overnight it takes a long time. Therefore, it is important to change the quarter-on-quarter (QoQ) narrative.”

Dr Satyanarayana Chava, Founder & CEO, Laurus Labs, also expressed same sentiments, saying: “There is a dichotomy – investor wants quick returns. Management has to keep long-term interest intact. To align these things is a challenge and has to be balanced. Companies taking care of stakeholders with good corporate governance practices will be rewarded over long term.”

According to professor V.A. George, Executive Chairman of Thejo Engineering, pillars of governance are values on which we build transparency, honesty, and concern for society.

“I thank my parents for instilling the values in me. I thank knowledgeable investors and two founders and other stakeholders,” he said.

Debashis Basu, Founder-Trustee of Moneylife Foundation, and Editor of Moneylife, pointed out, “While we are assembled here to give awards for the best and the second-best, let me make one thing absolutely clear. Each of these business leaders is equally exceptional in what they believe in and how they have lived up to their beliefs. They are all winners in my personal view and I am sure will be winners in the coming years.”

Explaining the selection process, Basu said, “For starters, the initial shortlist was based on direct nominations from several famous investors, analysts, fund managers, and researchers, who in themselves would have comprised a top jury. The nominations themselves gave us, the jury a very filtered list of companies to start with.

“The nominations went through a rigorous qualitative and quantitative analysis by Gautam Bafna and his team at Wisdom Torch Consulting Solutions. They created the framework and evaluation template to judge these 35 companies under 11 major heads. The information collated by Wisdom Torch on each company was distilled, quantified, colour coded, and summarised into an easy-to-understand presentation for the jury.”

Analysts at Moneylife then did another round of search on Watchoutinvestors.com for any regulatory action the jury may have missed. J.N. Gupta, MD of Stakeholder Empowerment Services, allowed access to their website for details on some of the companies that are tracked by the proxy advisory firm.

T.S. Krishnamurthy, Trustee of Moneylife Foundation, presided over the award function.

In his address, the former Chief Election Commissioner said, “The Indian stock market has dramatically transformed over the last two years since the Covid lockdown. Investors are looking for companies with a good track record and good corporate governance practices. This independent corporate governance award that is judged primarily based on objective criteria very timely and we hope that this award will become a benchmark over the years.”

The award function was attended by several prominent personalities from all fields, including several investors, analysts, fund managers and researchers from across the country.

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