Discussing wealth: (L to R) SEBI's G.N. Bajpai, TCS' S. Mahalingam, Birla's Santrupt Misra, Godrej's Adi Godrej, Birla's Sumant Sinha, Stern Stewart's Tejpavan Gandhok, GAIL's Proshanto Banerjee, Wockhardt's Habil Khorakiwala and ICICI Bank's Nachiket Mor

Just what is wealth creation all about? it was a question on everybody's mind gathered at the Taj, Mumbai for the second Business Today Corporate Governance Summit, presented by BPL Mobile. The evening also saw the release of the issue of the magazine featuring the fifth BT-Stern Stewart ranking of companies that create wealth. The difference this year was that the methodology had been tweaked to represent not market valued added (MVA), but Wealth Added-which measures wealth flow in excess of the investors' expected return. As a result, sectors such as pharma, FMCGs and it had lost out on the latest chart, said Stern Stewart's Tejpavan Gandhok; their investor expectations had overshot performance. The real heroes, instead, were the "unsung heroes"-the oil and gas majors.

The chief guest, G.N. Bajpai, Chairman, SEBI, noted that investors actually care little about people in companies-they want stock appreciation. "The relationship of investors with a company is purely economic," he observed, but saw wisdom in wealth distribution being extended to all stakeholders, not just shareholders. "A concept of sharing the wealth must be developed," he urged.

That was followed by a panel discussion on meeting the expectations of both investors and employees. "I think being able to align employee interest with shareholder interest is the best way of going about creating wealth," said Adi Godrej of the Godrej group, detailing his group's variable remuneration system. Stock options, however, were not a tool favoured by all. "To me," said Santrupt Misra of the AV Birla Group, "reward is a perceptual and psychological concept, not an economic concept."

Presenting the wealth index: BT's Ashish Bagga (left) with SEBI's G.N. Bajpai releasing the Business Today special issue on India's Biggest Wealth Creators

Nachiket Mor of ICICI Bank explained how his bank had succeeded by focusing on employees-and leveraging technology for strategy execution, especially to meet the challenges of diversification. "While we can see a lot of speed in the market and a great deal of aggression," he said, "what has gone behind it is a fair bit of planning."

Habil Khorakiwala of Wockhardt dwelt on how his pharma company had boosted motivation and competence levels to turn R&D and exports into twin strengths for a global competitive advantage. "Another major point is to align our organisations with what is to India's advantage," he said, adding that well-managed human resources could work wonders on that score.

Proshanto Banerjee of GAIL touched upon the company's growth strategy under the constraints of regulation. Benchmarking with the world' best was one aspect, and driving market growth (rather than being driven by it) was another, even as professionalisation of the staff continued apace. "The market has responded extremely well to this," he said.

Sumant Sinha, also of the AV Birla group, gave the audience an overview of his group's response to economic changes, before saying that market cap depended largely on discounted future cash flows, and so managing expectations of Future Growth Value (FGV) was key. "I think it is very important to manage the communication aspect well-over and above the actual creation of value in the company."

Wealth watchers: A matter of their expectations

But how best does a company stay ahead of expectations? The pharma case came into specific focus, with expectations of the sector reigning so high-given India's unique thrust in global generics. There were risks, of course, but were they being communicated to investors effectively? Bajpai advised companies to tell investors of the limits to wealth creation potential-especially with economic ages shortening all the time.

What about the IT sector: could it hope to keep matching expectations? S. Mahalingam of TCS responded with surprise that anyone doubted the sector's growth sustainability. The sector had its future well figured out, he said. And FMCGs? "I think there has been very little radical innovation in the industry," complained Godrej, asking his sector for some fresh big ideas.