In a bid to bring more accountability and responsiveness among companies toward all stakeholders, new guidelines on corporate governance that will be voluntary for a year but fine-tuned eventually as mandatory rules were unveiled Monday.
“India's standing as a rising economic power is closely linked with how we can create opportunities for all,” President Pratibha Patil said while releasing the manuals on corporate governance and social responsibility here.
“India, as the world's largest democracy, attracts a lot of attention. The corporate sector as it extends its operations around the globe must also play an active role in the nation's socio-economic development,” the president added.
While the guidelines on governance cover areas like appointment of directors, auditors, their roles, remuneration and responsibilities, those on social responsibility deal with how companies can become more responsive towards their societal obligations.
The new norms, designed in consultations between corporate affairs ministry and apex chambers, also come against the backdrop of the Satyam Computer Services scam and similar questionable actions across the globe during slowdowns and crises.
“The existing set of corporate governance guidelines needed to be taken to a higher level and hence we came up with these,” said Corporate Affairs Minister Salman Khurshid.
Among some guidelines that are mentioned in the manual are:
- Specification on responsibilities of independent directors
- Structure of compensation to non-executive directors
- Separation of offices of chairman and chief executive
- Constitution of an audit committee comprising non-executive and independent directors
- Not more than 10 percent of audit revenues to come from single corporate client or group
- Auditors to be rotated every six years
- Adequate safeguards for whistle-blowers
Some of the corporate social responsibility (CSR) guidelines are:
- Allocation of specific amount in company budgets for such activities
- Disseminate information on CSR policy and activities to all stakeholders
- Partner with local authorities to identify projects of need