Corporate governance guidelines made mandatory for CPSEs

26 Mar 2010

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The union cabinet on Thursday approved the continuation of the guidelines on corporate governance for central public sector enterprises (CPSEs) on a mandatory basis. The guidelines are applicable to all CPSEs, a government release said. 

The guidelines cover issues like composition of board of CPSEs, audit committee, subsidiary companies, disclosures, code of conduct and ethics, risk management and reporting.

The guidelines have been modified and improved keeping in view the experience gained during the experimental phase of one year and includes additional provisions relating to monitoring the compliance of guidelines by the CPSEs and formation of remuneration committee, the release said. 

Since the concept of corporate governance is dynamic in nature, it has also been provided that suitable modifications in these guidelines would be carried out to bring them in line with prevailing laws, regulations, Acts etc from time to time, the release said.

The implementation of the guidelines on corporate governance will facilitate protection of interest of shareholders and other stakeholders and also ensure transparency in the operations of CPSEs, the release added.

 The guidelines on corporate governance for CPSEs, which were voluntary in nature, were introduced in June 2007 on an experimental basis for one year. 

It was felt that while the principles of corporate governance apply equally to both the public and private sector, there was a continued need to adopt and apply the good corporate governance practices in respect of CPSEs where huge public funds are invested. The need for adoption of good corporate governance principles has been reinforced in the light of recent events in the corporate world.

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