Podcast Episode #75 Proof of the Corporate Governance is in the Earnings

Proof of Corporate Governance is in the Earnings –
Shifting focus from Accounting to Accountability
Entity Profitability and Growth Index of
M&M and Reliance

In continuation of my mission to establish ICGI – The Institute of Corporate Governance of India the fifth and final part – CREAM Report – Proof of the Corporate Governance is in the Earnings – Entity Profitability and Growth Index of M&M and Reliance.

CREAM Report:
1. Corporate Atomic Structure, [an intro] enlarging on the basic principle by which Organization Structure is derived with everlasting Metrics and Benchmarks.
2. M-Management Quality: Strengthen the Independent Directors – LODR 17-27 of SEBI is brought in 1. Board of Directors [27 Process Blocks. PBs] and fundction of Board Committees in 60 PBs, establishing Standards. [Part 1] [87 PBs]
3. Standards on Vigil Mechanism enhances SEBI’s LODR #22 by

1. A. Maintaining ethical business standards: [30 PBs] ; 2. B. Commitment to business associates, suppliers, customers and the environment [93 PBs] = 30+93=123: [210 PBs cum.] [Part 2]

3. R- Risk Management [34PBs] and Internal Controls [5 PBs]: 39 PBs setting Standards. [249 PBs cum] [Part 3]

4. A – Accounting Quality – Material Accounting Policies. [47 PBs] [ [296 PBs] [Part 4]

5. E – Earnings : [12 PBs] establishing standards first and then M&M and RIL Analytics of Entity Ratings for both. [12+296-308 PBs] [Part 5]

My findings: C – Corporate Governance goes by Newton’s 3rd Law. Establish Standards first.

I have taken stats from the published Annual Reports for both the companies in collating info for 2021 to 2024. Standard CAGR and CARR are set @15% for most cases and @3% CARR for consumption. Entity Rating is derived.

This post discusses the GDP break-up of India with Agriculture, Industry and Service Sectors as of 2022-23 [US$2.981 trillion] and projecting to 2030 [US$5 trillion]. In this context Corporate participation in Profitability and Growth Index is explored as to how they would move forward with Modi’s Viksit Bharat 2047 in sight.

In this respect I found, being an age-old CA, the inadequacy of Accounting as a tool of management for decision making. Hence I propose in this study a focus on shifting from traditional accounting to accountability, with an emphasis on setting targets for 2030 and tracking performance, using CDGR and CDRR – Daily

1. Accounting is not based on science, but is a debit credit hypothesis. It has tied down the management to ex post facto analytics.
2. Accounting cannot bring in Accountability but corporate governance can. I propose a strategy of dividing large workforce into small 5-member teams, unleashing the energy of all.
3. In Corporate Governance analytics, disparate companies like e.g., ICICI Bank or Deloitte can be compared with say Bajaj Auto.
4. My study proves the need for an independent ICGI.