Piyush Goyal bats for self-regulation to improve corporate governance in start-ups 

Commerce and Industry Minister Piyush Goyal advised the start-up community to practice self-regulation to strengthen corporate governance standards. 

Speaking at the Global Unicorn Summit, jointly organised by CII with DPIIT, the minister recommended the start-up community to develop corporate governance standards based on which auditors can transparently audit accounts and report malpractices. 

“We need to strengthen that (corporate governance) in our start-up ecosystem. The kind of reports that we are reading of late about revenue and data fraud, tax evasion, these kinds of malpractices need to be clipped at an early stage. Otherwise, they will earn a bad name for our start-up world,” he said. 

He asked the community to take this subject ‘very seriously’ in their internal interactions. 

“We have by and large been insulated from this problem so far. I hope these don’t become the norm in years to come. It will really kill the entrepreneurial spirits of our young start-ups and can have very damaging effects in years to come.”  

“Clearly, there is no shortcut to success. Shortcuts always come with a huge price tag. Therefore, I would only urge everyone not to use any of these short cuts, think in the long term, create sustainable wealth both for you, for the society and the nation,” he added. 

Goyal’s comments come in the wake of a series of financial irregularities incidents that have rocked the start-up ecosystem in India.  

Recently high-profile start-ups, including fintech firm BharatPe, social commerce platform Trell and business-to-business (B2B) fashion e-commerce company Zilingo -- which are all Sequoia Capital portfolio companies -- have come under scanner with their respective founders found involved in alleged financial irregularities and violating the corporate governance rules. 

As of now, the co-founders of BharatPe and Zilingo, Ashneer Grover and Ankiti Bose, respectively, have been suspended by the respective company boards for their alleged involvement in financial frauds and for flouting governance rules. Sequoia India’s managing director Shailendra Singh resigned from the board of embattled Singapore-based start-up Zilingo.  

In a blog post addressing these recent incidents, Sequoia said it will have zero tolerance towards proven wrongdoing, and that it will continue to respond strongly to wilful misconduct or fraud, and take proactive steps to drive increased compliance across its portfolio companies. 

“Recently some portfolio founders have been under investigation for potential fraudulent practices or poor governance. These allegations are deeply disturbing. We have always strongly encouraged founders to play the long game. We focus on the enduring, and discourage focussing on vanity metrics,” the post said. 

Sequoia said it will take proactive steps to drive increased compliance across its portfolio companies including governance trainings for founders and senior management, implementation of whistleblower policies, more independent board representation, asking for more disclosures and more rigorous adoption of internal audits and controls. 

“We will continue to respond strongly when we encounter willful misconduct or fraud...We will continue to have zero tolerance towards proven wrongdoing. We won’t hesitate to act to protect the interest of the company and employees, even if it costs us financially. We will take tough calls where needed in the interest of doing what is right,” the storied investor said in the blog post.