Guidelines for corporate governance approved for implementation

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Chennai, Jan 28 (UNI) In a major initiative, the Centre has approved implementation of guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs), Union Heavy Industries Secretary Dr R C Panda announced today.

Delivering a special address on "Corporate Governance in Public Enterprises" at the SRM University campus at suburban Kattankulathur here, he said this was necessitated following the government's decision to enhance powers for 'Navaratna', 'Miniratna' and other profit making CPSEs. More CPSEs were being granted the 'Navaratna'status and this has increased their public accountability.

Pointing out that 217 operating CPSEs in India had contributed 36.8 billion US dollars to the government till March 2007, he said they should evolve into global entities in line with the emerging market dynamics. "Yet the unique culture of the public sector being the custodian of public assets, resources and wealth creators for the nation, and fulfilling social needs of a growing economy should not be lost'', he added.

The guidelines would be applicable to both listed and unlisted CPSEs and cover issues like composition of Boards, audit committee, subsidiary companies, disclosures, code of conduct and ethics, risk management and compliance, he added.

He said the guidelines had been formulated by the Department of public enterprises keeping in view relevant laws, instructions and procedures and after taking into account the views of various stake holders including the ministries, CAG, SEBI, Institute of Chartered Accountants of India, Institute of Cost and Works Accountants of India, National Foundation for Corporate Governance and Institute of Public Enterprises, among others.

Citing a survey of Indian companies, Dr Panda said corporate governance has emerged a potent factor influencing decision making, integrity of accounting and quality of transparency that would play a vital role for the companies to get better rating in getting access to the capital market.

Observing that the issue of corporate governance has occupied the centre stage for both public and private sectors, the government recognised the need of good corporate governance for fulfilling a range of socio-economic goals.

"If the structure of corporate governance is to be made participatory, accountable, transparent and responsive, the relation among the owners and managers of enterprises has to be restored not only by legal measures and administrative practices, but also by efforts to change the age-old entrenched values through education and proactive steps by all the stake holders'', he added..

Stating that the Centre had attached much importance to corporate governance to be followed in public sector and private sector enterprises, Dr Panda said corporate governance has assumed importance across the world in the wake of several scandals and financial collapses.

Describing corporate governance as a mechanism of in-built system of checks and balances to ensure transparency, competitiveness and efficiency in the context of global economy, he said guidelines were being continuously evolved to develop an integrated strategic management framework that helps in achieving outstanding performance standards required to fulfill organisational goals and objectives.

"By making corporate accountable and transparent in the decision making process, corporate governance laws across the globe are trying to avoid Enron like financial debacles where thousands of small investors lose their hard earned money," he remarked.

Observing that the concept of corporate governance in India was initiated in the aftermath of the 1992 Stock Exchanges scam and a JPC report recommending corporate reforms, Dr Panda said the government and the industry started a movement for better corporate governance.

"When large amounts of public money is invested, it becomes imperative to ensure that these companies are governed well, management is accountable to the Board, the Directors discharge their responsibilities appropriately, proper risk management systems are in place and information is disclosed to shareholders in a timely and transparent manner", he added.

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