First good governance begins in the founders’ heads. No amount of oversight by investors, boards, audit committees or auditors can ensure a company is well governed if the founders are not committed to this objective.
Sanjeev Bhikchandani
A must-read thread from @sbikh on corporate governance
Since @Sequoia_India blogged about governance issues, I thought I would add some random thoughts of my own on corporate governance. (1/12)
Since @Sequoia_India blogged about governance issues, I thought I would add some random thoughts of my own on corporate governance. (1/12)Two great pieces of advice I received when we raised our first round back in the year 2000:
1. “Always remember your independent directors and auditors are there to save you from yourselves”
– Kaushik Dutta then Partner at PWC at the time they were accepting our audit. (2/12)
First good governance begins in the founders’ heads.
No amount of oversight by investors, boards, audit committees or auditors can ensure a company is well governed if the founders are not committed to this objective. (3/12)
2. “Always create situations of convergence of interest rather than conflict of interest”
– Satish Mandhana then with CDC. Both these gems have stayed with me. (4/12)
When I was on the Board of @makemytrip, I was awarded ESOP. In line with Satish Mandhana’s sane advice, @hitobs, Ambarish, and I decided that the economic benefit of this ESOP should go to Info Edge rather than to me as that would align all of our shareholders’ interests. (5/12)
After all we decided if I am spending time away from Info Edge, it should benefit all of Info Edge shareholders rather than me alone. (6/12)
We thought we had done a small thing. We didn’t think much about it.
However, when @makemytrip listed, we sold the stock, and the profit came to Info Edge, we got calls from several of our institutional shareholders commending us for this act. (7/12)
One of them even said “In my view Info Edge gets a 25% premium in the stock price for good corporate governance. Always remember good governance leads to higher valuations.” (8/12)
It is very very hard to get good independent directors for your company board – given the fiduciary responsibility and the potential liabilities. There is very little upside for good people to accept Board positions. (9/12)
They will only do it if they are completely convinced that you are impeccably governed. And you cannot build a great company if among other things you don’t have a great Board. (10/12)
Finally, if you are better governed you will sleep more peacefully at night. (12/12)
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