Corporate governance norms must for all CPSEs

NEW DELHI: The government today asked all the 246 central public sector enterprises to mandatorily follow corporate governance norms and business ethics, a step to ensure more transparency in their functioning.

The decision to make these norms binding on the central public sector enterprises ( CPSEs), both listed in the stock market and unlisted, was taken by the Union Cabinet.

"The guidelines on corporate governance have now been made mandatory and are applicable to all CPSEs," the Department of Public Enterprises ( DPE) said after the Cabinet meeting.

Norms, introduced in June 2007, were voluntary in nature for a period of one year on trial basis. However, "in the light of the recent events in the corporate world, the continued need for adoption of good corporate governance principles have been reinforced," the DPE said.

The role of directors and auditors had come in for scrutiny after the unraveling of the multi-crore Satyam fraud in 2009.

The government felt that while the principles of corporate governance (CG) apply equally to both public and private sectors, "there was a continued need to adopt and apply the good CG practices in respect of CPSEs where huge public funds are invested," it said.

As much as Rs 5,28,951 crore has been invested in 246 CPSEs, according to the annual report of the department for 2008-09.

The guidelines cover issues like composition of boards of CPSEs, formation and role of audit committees, functioning of the subsidiary companies, disclosures, code of conduct and ethics, risk management and reporting.

The guidelines have been improved in the wake of the experiences gained during the experimental phase of one year.

The fresh norms include additional provisions relating to monitoring of the compliance of guidelines by CPSEs and formation of a remuneration committee.

The DPE said implementation of these guidelines will facilitate interest of shareholders and ensure transparency in their operations.