CII launches good governance charter for startups

The Confederation of Indian Industry (CII) has launched a corporate governance charter for startups to help them adopt practices that would prevent a recurrence of situations where shareholders of high-profile startups suffered significant losses. 

The charter comes at a time when Indian startups like Byju’s, BharatPe, GoMechanic, and Groyyo hit the eye of a storm over their alleged doubtful governance practices.

This comes as India emerged as the 3rd largest ecosystem for startups globally with over 1.12 million recognized startups spread across the country.

CII is one of the oldest and largest non-government trade and advocacy groups in India. 

CII acknowledged that the startups have undoubtedly emerged as essential contributors to the Indian economy in terms of employment generation, share in GDP, raising capital, foreign direct investment, innovation, and social integration

Launching the charter, CII noted that startups invariably need supervision and guidance from seasoned professionals to minimize their business miscalculations.

The charter will help these startups in the early adoption of good governance practices and will help them evolve as a leader of tomorrow, mentioned CII president R Dinesh in his introductory note.

CII mentioned that in the wake of specific instances of governance failures amongst startups coming to light, these businesses must adopt sound governance practices that would lay a strong foundation for the continued success of these entities. These practices would help startups to become stable, sustainable, and globally competitive in the long run and grow to become global corporations.

“Startups, an important constituent of the Indian business ecosystem, will gain immensely from the governance charter, which will help startups build stakeholders’ trust, especially investors’ trust in their businesses,” Sanjiv Bajaj, the immediate past president of CII, said in his introductory note.

Startups may like to adopt good governance practices based on structure, size, form, and scale while focusing on growth, profitability, and other business metrics, the charter says. 

The board of directors and management of startups may also focus on good governance—an essential ingredient for the success of startups, and its early adoption leads to benefits (both tangible and intangible) for the organization, it notes.

The charter mentions that accountability, transparency, fairness, and responsibility are the central tenets of good governance practices. 

The charter prescribes guidelines for startups, keeping in view the stages of their life cycle like inception, progression, growth, and going public stage. It also offers an online self-evaluation scoreboard.

Kunal Bahl, the chairman of CII national startup council and co-founder of Snapdeal, said that the governance practices that a startup needs to follow vary depending on its life cycle stage.  

“This CII charter is designed to support startups in understanding the governance requirements they may need to follow in different stages from inception to becoming a public company. Besides, there are certain quintessential governance norms which Startups may follow irrespective of the stage at which they are,” he said.