Demanding global standards for corporate governance is expected to set new benchmarks for India Inc

Pay and bonuses of senior management has become a ticklish issue for corporates across countries and a source of heightened shareholder activity, said Zarin Daruwalla, chief executive officer at Standard Chartered Bank, India, during a discussion on corporate governance on Wednesday.

In the UK, the jurisdiction of the bank’s parent organisation, more than 75% of shareholders have to vote in favour of the CEO compensation, Daruwalla said, addressing the virtual panel hosted by the Confederation of Indian Industry.

“There's a real issue if you don't have more than 75% of the vote, then you have to address the shareholders’ concerns,” she said.

Standard Chartered had adopted a fair pay charter to ensure that employees receive compensation that supports a certain standard of living, across all markets that it operates in, the CEO added.

Environment
Environmental issues would be an area that would see huge shareholder activism going forward, according to Daruwalla.

Standard Chartered had taken a decision a few years ago to not fund coal-based power plants, coal mining and defence equipment manufacturing, she said, adding that these are the kind of things shareholders wanted to see.

Providing an example of shareholder activism in this area, Daruwalla said, “Recently, Standard Chartered led SBI's (State Bank of India) bond issue but in the UK there was huge social activism that SBI's funding coal-based power plants and funding coal miners and why is Standard Chartered a lead arranger for SBI's bond issue?”

Corporate responsibility
“The expectation for corporates nowadays is not of doing no harm to the community but it's about what have you done for the betterment of the community,” Daruwalla said.

According to her, it was unfortunate that in the 1970s, businesses adopted the views of American economist Milton Friedman that the social responsibility of business is to increase profits.

Daruwalla quoted former Sainsbury’s CEO, Justin King, who observed that profit is what the customer allows you (firms) to earn for doing a good job.