The federal structure of the Indian democratic system has two houses (lower & upper) of elected and / or nominated representatives of the people. These houses are the House of the People (Lok Sabha) and the Council of States (Rajya Sabha).
The main business of both the Houses is to legislate. Besides passing laws, Parliament can, by the permissible means, exercise control over the running of the country and safeguard people's liberties. Though there are differences between the functions of the Lok Sabha and the Rajya Sabha, they together are accountable for the effective governance of the country and this two-level structure of parliament certainly provides intellectual, political & diplomatic depth essential for the 'management' the country.
Why cannot this two-level structure be made also applicable to the Indian corporate houses, which are now becoming fiercely competitive and multinational (in the genuine sense of the word)? In India, the Companies Act provides for constituting the Board of Directors, which is responsible for exercising strategic oversight over business operations, while directly measuring and rewarding management's performance.
Simultaneously the Board also is accountable for ensuring compliance with the legal framework, integrity of financial accounting & reporting systems and credibility in the eyes of the stakeholders through proper & timely disclosures. Further, the statute requires the Board of Directors to form various committees, including audit and remuneration committees with clear mandates.
However, unlike the Constitution of India, the Companies Act does not have provision for what I call a Management Board (hereinafter referred as MaBo), a second tier of the Board of Directors. The increasing complexity of business administration & management and restrictions on the number of Directors on the Board, definitely call for a debate on having a MaBo, a quasi-junior of the Board of Directors.
I believe that the organizations demonstrating the 'Corporate Governance' in letter and spirit, now need to earnestly consider constituting a MaBo, which will allow the Board of Directors to become more strategic, as the immediate and near-future appear extremely 'regulated', 'competitive' & 'complex' to an extent. The Board of Directors will be called upon to perform more 'brainy' work and therefore, they would have to consider an alternative supportive mechanism for effective discharge of strategic oversight over business operations.
What could be the key functions of such a MaBo?
Who could be the members?
Employees who have,
What could be the advantages of the MaBo?
What could be the composition?
What could be the key rules for effective & efficient functioning of the MaBo?
Many Indian companies in IT, FMCG & Telecom sectors & even in traditional sectors like manufacturing do have forums like the Strategic Management Council, Key Executive Team, Senior Management Council, Leadership Council, etc. Such councils / teams carry out some of the tasks of the suggested Management Board. I guess the time is ripe to make such arrangements more formal, structured & accountable in view of the likely advantages and the indicated challenges of business management going forward in India.
If the spirit of democracy lies in, "for the people, by the people, of the people", then the suggested practice of having a formal Management Board, a second tier to the Board of Directors, surely deserves a debate.
In a nutshell, the business management structures & processes have to be subservient to the business needs and people's proven capabilities. And with the growth in the country's economy, the business management structures will become more participative, broad-based, responsive and 'inward' looking.
"Nothing in the world is as powerful as an idea whose time has come," said Victor Hugo, the famed French poet. The Management Board is that idea.