CSR Workshop & Panel Discussion

SCOPE to go for OECD-style rating of public sector firms

Filed under Corporate Governance |

Chennai/ Hyderabad : The Standing Conference of Public Enterprises (SCOPE) has decided to go for a new accreditation system for public sector undertakings (PSUs) that would indicate the extent of professionalisation of their governing boards. For this, it is working on a model and is also in touch with the Organisation for Economic Co-operation and Development (OECD), a grouping of developed countries, where such a system is in place.

Describing it as a “major exercise,” SCOPE director general UD Choubey told reporters here today that the rating system was part of a set of reform proposals aimed at professionalising the 249 PSUs in India. He was in the city for a two-day conference of PSU heads on corporate governance and specifically the professionalisation of PSU boards.

According to Choubey, 300 posts of independent directors and 69 of CMDs are vacant in PSUs at present. SCOPE has asked the government to improve succession planning in PSUs, and called for immediate filling up of independent director positions and separation of ownership from board-level management.

Choubey said the government had accepted a proposal of the Public Enterprises Selection Board to initiate the process of filling up board positions 12 – 16 months ahead of their expected vacancy. In the last two-three weeks, the government has also come out with an accelerated programme for selection of functional and independent directors.

SCOPE wants the government to complete the exercise in four months.

SCOPE was against the requirement of the Securities and Exchange Board of India which specifies that the number of independent directors for listed companies be 50 per cent of the board strength without them. “This creates an enormous problem in terms of decision making,” Choubey said. Instead it wants only one-third of the board strength as independent directors. He also wanted the government mandate induction training for them, given their varied backgrounds.

SCOPE is also strongly against separation of positions of chairman and CEO. Choubey said, “Just because some EU countries have separate chairman and CEO, it cannot be applied here. In India, we have a personality-dominated corporate culture, where everything moves around the CMD. In this scenario, the CEO would emerge as an alternative power centre and decision making will suffer.”

He further said, “SEBI should look at what happened to the share values of the companies which separated the chairman and CEO. What if the government appoints a political person as a chairman?”

On the 2 per cent mandatory spending on corporate social responsibility, SCOPE supports the move and PSUs are already implementing it but it wants a level playing field by applying the same requirement for the private sector companies too.

(Business Standard)

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