 Namaste. In the last session, we had discussed corporate governance, the structure, the need for governance and what will happen if there is a lack of governance. I hope you have understood remembered it. I had also asked you to check in your annual report who are the directors of your company. I hope you have done this. Also look at the AGM notice that is annual general meeting. There will be some information about board meetings as well. So, that was about the basics of governance. Today, we will look at the global models. Although the corporate governance principles are global in nature, different things are given emphasis in different parts of world. So, today's discussion will be on that and as we have seen last time, ethics is very important part of governance which is very much there in Indian culture. So, we will discuss about the same. Now, by far the most popular model is Anglo-US model, one which evolved in US or in UK mainly in English speaking countries. It has spread all over the world because major MNCs from there operate everywhere in the world and many of the regulators have adopted this model. Now, here CEO plays pivotal role. So, Chief Executive Officer is one who is looking after the operations, is also responsible for reporting to the board, is also responsible for reporting to the shareholders. Now, the capital markets are very active in US especially. So, if CEO performance declines, it has an impact on the stock market performance of the company, the stock prices typically drop and that is a control mechanism on the CEO functioning. Now, the short term actions are very important because the appointment of CEO itself is for 2 years, 3 years or sometimes even 1 year. So, the profit in that year, many times in that quarter plays a very important role because you know stock markets are very sensitive. The profits or the performance will have immediate impact on the stock prices, not even at the end of the quarter it happens every minute. So, the positive side or negative side in the short term becomes very important. It is very much necessary in the model that there should be active market for corporate takeovers. So, if the management team is not doing well, the stock prices will fall, that will bring in bad name to the company. But it does not have immediate effect on the controlling group because if they have reasonably high number of shares, they can continue to be in charge of the company. But because of the falling prices, the company becomes a prey for somebody wanting to take over. So, other groups may take over the company and the current management gets exposed because of takeover threat. That is how the Anglo-US model operates, that a negative performance is penalized by reduction in prices and if the negative performance continues for a longer time, the whole company will be taken over by somebody else. Now, there is a agency theory which is very important for understand this model. This is a study of how to align the interest between shareholders and management. These are considered to be the most important stakeholders and you can go in, there is a lot of research which has happened in agency theory. Now, the major solutions given are in the form of big paycheck. So, CEO is given substantially high salary, a very high salary and also lot of perks. Now, the idea is that keeps CEO on toe. If the performance falls, the person will lose out on sizable financial benefit that keeps person motivated. Not only the CEO, it is also true for senior management team. They are also given other benefits in the form of stock options. I hope you know stock options. So, they are issued lot of shares often free of cost or at a discounted price which are converted after some days. So, they have an incentive that if they are performing well, the prices of the company will, the stock of the company will be high, since they are getting stock at a negligible price, they would be able to make a lot of money. And the third is market for takeover which we have already seen that in case of bad performance fall in the prices, company becoming a easy target for takeover. And of course, the new group will kick off the current team. So, that becomes a, it is a carrot and threat, carrot of a big paycheck, threat because a poor performance will mean loss of job and loss of control on the company. Now, here is an example of how big the paycheck is. This was a recent news, maybe one year old news item. We know the largest bank in India is State Bank of India. At that time, that is in year 1617, it was headed by Arun Dati Bhattacharya. Now, Arun Dati is managing a bank as big as SBI which has a market share of 23 percent in deposit and 21 percent in advance. So, you can imagine how big the state bank is in, if you look at the Indian banking industry. Her salary was 28 lakhs per annum which is even less than 5 percent of salary of ICICI Bank CEO. At that time, Chanda Kochar was CEO of ICICI Bank. Her compensation was 6 crores versus compensation for Arun Dati is only 28 lakhs. I am just trying to bring the difference. This SBI is a PSU, under the public sector the salary is 28 lakhs even for the chairman and MD and for CEO in private sector it is 6 crore. This is not including other perks which the CEO of private sector banks get. This is not only for ICICI. I have shown you the salaries of other private sector banks. So, Aditya Puri who is in charge of or CEO of HDFC Bank, you can see the salary for 2016 was 9.3 then 10 crore now 9.67 crore. Remember this is excluding the perks. This is the cash salary. For Chanda Kochar it was 4.79 then 6 and now you know that she is held up in a fraud. So, she has been removed. Then Sikha Sharma who heads Axis Bank it is 3.73, 4 crore, 4 crore for Rana Kapoor, S Bank again something like 5 to 6 crore. For Uday Kotak, for Kotak Mahindra Bank it is about 3 crore. So, do you feel now wanting to join the bank as CEO? That is true for CEOs of many private companies and this is mainly because of US model where the top management team gets a very high salary. Are you getting? This was just as an example. Now, there is also a Japanese and German model. Keep in mind that these are advanced countries, but the capital markets are not as active as in US. So, the market control as envisaged in US model or Anglo-US model is not very active. Now, here instead of short-term goals long-term goals are given more importance and shareholders have a more dominating role. The chances of mergers and takeovers are relatively less because there is no active market and regulators have more control. They do not encourage takeovers that easily. There is a restriction on non-banking finance. So, banks play a very major role in Japanese and German companies. Even their corporate governance because banks are major stakeholders, there would be lot of control of banks or the important institutions on the functioning. Instead of market control, it is more of a bank dominated economy. Now, we will go to Chinese model. We know that for last 10-15 years, China is lot in news and China has acquired major market share in various types of commodities. Lot of production or manufacturing activity has shifted to China. Now, in China, it is a dominance of government companies. Now, the companies which are partly private eyes, they have got trading stocks and there are also standards of governance. But in many cases, there is a dual board and it is truly insider company, insider dominated system. So, for day-to-day operations, there will be one board, there will be one senior board consisting of government party leaders, etc., who have the final say in the decision making. So, it is a dominance of a state and the minority shareholders' rights are not protected, they do not have much rights at all. That is a Chinese model. Now, we will look at the corporate governance model in India. Here by India, I mean ancient India because the current model which is being practiced is mostly Anglo-US model. But from a very long time in the history, we have got a model with a ethical foundation. We know that Vedic period is perhaps more than 1 lakh years old and lot of ethical foundations or moral foundations have been laid down. So, even in prehistoric times, we do observe certain government related norms and mechanisms from various rugvedic reams or in Upanishads. Various norms for regulation are provided. For more well-documented norm, if we go to Kautilya's Arthashastra, a detailed treatise has been written about statecraft. So, though the name is Arthashastra, actually it is about governance. So, lot of governance principle, not only for government, even for corporates or businesses have been laid down. Now, if you look at the history records of Patliputra, which was the capital of Mauryan empire, we have a very well-administered city and there were properly laid down principles of governance. Now, four important principles which are known as four-fold duties or dharmas for the king or for any other leader, even for corporate leader. One is raksha or protection. Second is vuddhi. It is enhancement, not just growth also enhancement. Palana, having a maintenance and yoga kshema, which is safeguard, having controls. So, there were four-fold duties for the leaders. There are various salient ideas or thoughts which are there in the ancient scriptures, which are very relevant to governance. So, I have tried to list a few of them. The first one is atmanu moksha-artham jagath-hitayacha. So, all work is an opportunity for doing good for the world, jagath-hitayacha, for the good of the world and gaining both materially and spiritually. So, materially because you will get reward in this world, you will also get reward in the form of moksha or in other world. That is the basic principle of life. Then atmana vidyate viryam, atmana means self. So, strength and inspiration for excellence in work comes from within. So, divine or lord is within. So, it is not based on rewards from outside. You will see in the western or in the Anglo-U.S. model, it is mostly the bad paycheck or some threat. But here from vidin, vidyate viryam means from within you feel like doing good or doing selfish work. That is the driving principle. Tesham sukham tesham shanti shashvati. I hope you understand. Sukham refers to happiness, shanti refers to peace. Shashvati means infinite. Infinite happiness and peace is possible from the taking care of others or all well-beings. Because if we only try to get happiness, keeping others unhappy, that would not be a shashvati sukham. Because at some or other point of time, we get hit. So, here the message is that for a shashvati suk or for an infinite happiness, we have to take care of others also. Now, yogaha karmasu kaushalam or samatvam yoga uccate. These are two definitions of yoga that he who works with calm and even mind achieves the modes. So, kaushalya or the efficiency of karma depends on how much calm we are. If we are able to work without getting distracted, then we can perform very good. Our level of achieving will be very high. Yadishi bhavana yasya siddhi bhavati tadrishi. Bhavana means feelings. Whatever feelings you keep, same way you get. So, if you have bad feelings for others, you get bad things. But if you keep good feelings for others, you get good feel, good things back. So, for achieving better performance or for having a fair corporate governance, people in charge need to have fair and good feelings. Not just the outcome, even the means are important. Parasparam bhavayantah shreyah, parambhavasyatah. So, here parasparam bhavayantah, paraspar means mutual cooperation has been given very much of importance. It is not just a feeling of competition. Western model mostly emphasizes on competition, one who is the best will be made CEO. So, managers would essentially fight with each other because they want to prove that they are better than others. But in Indian model, lot of emphasizing has been given for mutual cooperation. So, nowadays world is slowly moving towards team spirit, that as a team we need to perform better. Because if company has to be good, then as a team we need to be good. So, that particular thing comes from this principle. Like that we can have lot of principles, but I have just tried to list a few of them. Now these are basic values of Indian principles of governance. Human beings are given lot of importance because an individual has a immense potential, energy and talent for perfection. There is no limitation for how well the human being can achieve. There is a holistic approach because unity of individual and universe is a starting point in the Indian concept. So, it is not a fight. If we try to disturb others, we also get disturbed. There is a holistic approach. This is useful within the team also and between the corporates and other entities or stakeholders as well. Now the subtle and intangible subjects are extremely important as much as tangible objects. Now if you look at the balance sheets of the companies all over the world, say 100 years before, the tangible assets were most important. Nowadays the intangible assets are becoming more important because of the knowledge society. Actually our ancient scriptures or Shastras had emphasized it thousands of or perhaps lakhs of years before that one needs to develop third eye or Gyanachakshu. One needs to develop wisdom. The inner resources are as much important perhaps more important like than outer resources. Outer resources are in the form of capital or land or plant and machinery, but to use them effectively you need inner resources. If you have got inner talent, the outer resources can be raised and the last point which we have already discussed is about cooperation. That cooperation is a powerful instrument for teamwork and the success of any team or any enterprise very much depends on the collective work. That does not mean individual achievement is not important but it should be supported by teamwork then one can perform consistently for a long period of time. Are you getting? So these are the important principles we have tried to compare various global models. We have a US model or Anglo-US model which emphasizes on CEO's role, lot of perks and salaries to CEO. The second is German or Japanese model which is more of a bank based. The third is Chinese model which is more straight driven. The fourth one which we have discussed is an Indian model which is more of ethics and moral driven. That it is not a regulator from outside but it is from within you feel that you should perform in a fair manner. So emphasis is on self-regulation. Nowadays the world is slowly coming to understand the importance of these concepts like self-regulation or team spirit or having the need of fairness within and so on. So with this we will stop here. Namaste then never.