Dr. Bimal Jalan - Governor, Reserve Bank of India     


Notes on - Best Practices among Corporates
- The Ranstad Award Ceremony, New Delhi, June 29, 2011


1. Awards are given to a corporate that is chosen as a most attractive employer based on research on "Employer's Image" among potential workforce. Based in Netherlands.

2. First time in India.

I must express my appreciation to Ranstad for organizing this event on Corporate Best Practices in India for the first time. Ranstad, as is well known, is one of the world's largest HR services Company, head-quarterered in Netherlands, and involved in providing best HR advice, search and selection of personnel in a large number of countries, including India and major industrial and developing countries.

Best corporates in India now have dominant market shares in certain critical sectors - particularly IT, banking and finance, automobiles, telecom, pharmaceuticals, and manufacturing in general. According to high profile job portals as well as research done by HR agencies, including Ranstad, these sectors have also become attractive choices for Non Resident Indians returning to India for employment. Ranstad already has a large presence in India with 65, or so, offices all across the country and today's ceremony would no doubt help in further strengthening Ranstad's HR support to India's best corporates.

Today's gathering consists of highly knowledgeable and experienced corporate managers, CEOs and heads of companies who are tracking both the global economic scenario, as well prospects of the Indian economy. In the light of current concerns about political governance, rising spread of corruption in the wake of 2G scam and global uncertainties, the overarching point that I want to emphasise is that India's fundamentals are extremely strong and will continue to remain so, irrespective of certain unfortunate recent developments.

So far as political situation is concerned, it is important to remember that, notwithstanding temporary set-backs, India's economy has in fact emerged stronger.

For example, just consider what the political scenario was after the Bofors scandal in the second half of 1980s, leading to the emergence of several short term governments in power. All this led to one of the worst economic crisis in 1991. To tackle this crisis, a process of widespread reform was initiated and Indian economy soon became robust and resilient.

The most interesting point is that despite several changes in government over the next few years [Name the 6-7 PMs] reforms introduced during the earlier period were not reversed, and in many ways, they were further strengthened.

Just think about the Asian Crisis and how India under a new government formation handled it. Nobody gave us a chance and our reserves were not that high. Yet, India emerged from the Asian Crisis as one of the fastest growing developing countries with large capital flows, high growth and financial stability.

This historical background, stretching over nearly quarter of a century, is important to bear in mind when we worry about India's prospects in the next10 or 15 years (say, India 2020 or India 2025). The basic strength of India is its free and democratic political system where governments may change, and where some governments may not do what is expected of them. Yet, people are free, corporates are free, and markets are free to do what is required to be done in their own interest, leading to high GDP growth with financial stability.

Now, let me take a few minutes to talk about India's current economic prospects. Despite all odds and ups and downs, India's capital markets are now much stronger. It is now possible to raise IPOs of a scale by large companies which would have been unimaginable even 10 years ago.

As a result, good Indian corporates today do not have any problem in raising capital for worthwhile projects and expansion. What is more, our corporates are now acquiring companies abroad, increasing their presence abroad and providing IT services directly rather than only through back offices of foreign companies.

Similarly, India's balance of payments position is also one of the strongest among developing countries. India now has large foreign exchange reserves. This again is a fundamental change - there is no shortage of domestic capital and there is no shortage of foreign capital.

India's domestic savings rate is of the order of 35% which is one of the highest in the world. Its investment rate is 37-38%, again one of the highest in the world. Now, even if capital inflows were to decline because of global uncertainties, such as developments in Greece and elsewhere, India's domestic savings rate and foreign exchange reserves would still be high enough to enable corporates to expand their operations and improve their competitiveness abroad.

I could go on. Let me just summarise the main point about India's macro-economic prospects. It is simply that irrespective of periodic ups and downs and cyclical shocks, there is little doubt that India's long-term prospects will remain strong. This should provide immense opportunities for our best corporates to expand at an accelerating rate. In short run, this may change but over 5 or 10 years, India will continue to grow at a fast rate.

Since the present ceremony is to award the best corporates chosen as the most attractive employers, based on a large survey of skilled personnel and enterprises in India undertaken by Ranstand, let me now say a few words on best corporate practices to attract talent.

Broadly speaking, globally there are two different corporate governance models:

  • The so-called "outsider" model, generally prevalent in U.S. and U.K., which separates control and management from ownership.
  • Then there is the "insider" model, mainly in Europe and Asia, where a relatively small group of shareholders exercise direct control over management.

Somewhere in between is the "outsider-insider" model where there are two-tier Boards - one the Supervisory Board which is dominated by the family, and the Governing Board which is largely professional.

In India, traditionally, the dominant model has been the "insider" model, but in the last decade, there has been significant move towards the "outsider" model, or a mix, with non-executive chairman being a large shareholder, and CEO being a professional from outside.

We all know what the traditional corporate best practices in terms of accounting, auditing and disclosures are. Auditing and accounting practices must be credible, follow the best international norms, and fully accessible to the public through quarterly disclosures, approved by their Boards.

All regulatory norms laid down by regulators, stock exchanges, and auditors must also be fully adhered to, and believed to be so, however difficult these may be.

From the HR point of view, in addition to these accounting, auditing and regulatory norms, I believe there is another equally important requirement. For want of a better word, let me call it "ethics", or "ethical practices". If a corporate wishes to attract the best talent, the reputation of a corporate for ethical conduct in performance of its business operations is, in my view, an extremely important attribute. "Ethics" is difficult to define, but I am sure most qualified professionals, looking for a job, know it when they see it.

What are the primary ingredients of ethical conduct by corporates? This is a long list, let me just mention a few. For example:

  • Sanctity of contracts,
  • Honouring legal obligations without trying to delay it by going to courts, particularly in India,
  • Consumer service, and not only sales,
  • Truth in advertising their products,
  • Even handed treatment of all employees, irrespective of gender, caste or creed, and transparency in promotions and appointments,
  • Ethical accounting - even if it reduces EBITDA.

Ethical behaviour in these respects is the best value-added that a good CEO can give to his or her corporation, which over time, would definitely be reflected in the ranking of a corp. as an attractive employer.

Let me conclude by saying that I believe that India today has the capacity and all the ingredients for success as the fastest growing economy, and as a home for talented professionals who are looking for best opportunities to realise their full potential.

Back to Speeches  

Previous  |  Next