New Delhi ,March 25: In a bid to ensure that financial misappropriations and frauds do not take place in corporate entities owned by the government, the Union Cabinet on Thursday made it mandatory for all Central PSUs to adhere to disclosure and accounting norms.

As result all 246 Central PSUs will now be required to strictly follow guidelines issued by the government in 2007, which included norms relating to composition of boards, formation and role of audit committees, functioning of subsidiary companies, disclosures, code of conduct and ethics, risk management and reporting.
“The guidelines on corporate governance have now been made mandatory and are applicable to all CPSUs,” official sources said.
The decision was taken keeping in view “the continued need for the adoption of good corporate governance principles”, which has been reinforced in the light of recent events in the corporate world.
Earlier, the corporate governance norms introduced in June 2007 were voluntary in nature for a period of one year on a trial basis. As per the norms, the number of functional directors should not exceed 50 per cent of the board’s strength and at least one-third should be independent directors.
Moreover, the audit committee of a Central PSU should have a minimum of three directors as members and an independent director should head the committee. Remuneration of directors should be disclosed in the company’s annual report.
The official release added that the government felt while the principles of corporate governance should apply equally to both the public and private sectors, “there was a continued need to adopt and apply good corporate governance practices in respect of CPSUs where huge public funds are invested.
As much as Rs 5,28,951 crores has been invested in 246 such entities, according to the annual report of the department of public enterprises (DPE) for 2008-09.
The guidelines have been improved in the wake of experience gained in the experimental phase of one year, the department said, adding that implementation of these guidelines will facilitate interest of shareholders and ensure transparency in their operations.

Age Correspondent