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Issue of December 2004 
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IT for better governance

In his keynote speech on corporate governance and the role of IT, Sunil Chandiramani, Partner, Ernst & Young chose to create a balance of technology and governance issues, and broadly outlined what technology could do in order to help an organization carry out corporate governance and achieve its business objectives as well.

Corporate governance

Chandiramani defined corporate governance as, "The system by which business corporations are directed and controlled.”

“The corporate governance structure specifies the distribution of rights and responsibilities among participants in the corporation and spells out the rules and procedures for making decision in corporate affairs," he added.

And this is how, he believes, corporate governance really provides a framework through which the company objectives are met and the means for attaining those objectives and monitoring performance are laid out. It's essentially all about putting the right structure, sets of rules, and processes in place and put together.

Corporate governance also provides clarity on who does what in a company. It defines what the CEO does, why separate independent directors and executive directors are needed. It talks about the board's and the audit committee's responsibilities.

Balance

An IT governance framework will also help strike a balance between performance and ethics.

"If you see the challenges the business world has faced like Tyco and Enron, corporate governance will aim to make sure that an organization puts in the right kind of processes and controls in place throughout the organization for doing parts of the job for the lifetime," Chandiramani explains.

Step further

He opines that corporate governance in current times has moved many steps further. Previously, it was more suggestive and restricted in nature. Going ahead, we have seen that the burden is now on the management to provide proof that the governance framework actually works and gives positive benefits.

"So it's not enough to say that we have a great governance mechanism. We must have a number of mechanisms to prove it works effectively for the entire lifetime of the organization," said Chandiramani.

The driver

The top driver for better corporate governance is that the management must need to give proof and certify certain processes in business. There is also the need to comply with regulatory body guidelines.

Another driver is the whistle-blower policy. Most large frauds have been identified by a whistle-blower. So this makes any employee a possible informant on who can tell when something is not right. Corporate governance provides less scope for insider trading. It asks to create an audit committee to look at a number of business and risk issues.

Role of IT

The role played by IT is to build the bridge between the business aspects of corporate governance and the reach and scope of technology. He concluded his speech by pointing out that the only way that CEOs can certify that all processes are risk-free is by ensuring that the MIS and governance is good. And the CIO and the IT department will have everything to do with these processes.

 
     
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