Resenting the Budget for 2016-17, then finance minister Arun Jaitley had said “public shareholding in government-owned companies is a means of ensuring higher levels of transparency and accountability.” While listing central public sector enterprises (CPSEs) was seen as one way to improve performance and competitiveness, allowing them easier access to the capital markets and making them more transparent and accountable, CPSEs have largely failed to stand up to scrutiny on corporate governance.
Typically, corporate governance norms for PSUs emanate from the Laws, Rules & Regulations of The Companies Act, 2013; SEBI (Listing Obligation and Disclosures Requirement) Regulations, 2015 and CPSE Guidelines issued by the Department of Public Enterprises under the Ministry of Heavy Industries and Public Enterprises. CPSE Guidelines state, “…as listed CPSEs are concerned, they have to follow the SEBI Guidelines on corporate governance. In addition, they shall follow those provisions in these guidelines which do not exist in the SEBI guidelines and also do not contradict any of the provisions of the SEBI Guidelines.” This makes it clear that all listed CPSEs have to follow, at the least, corporate governance norms as prescribed by SEBI.
However, non-compliance continues to persist. According to a report by proxy advisory firm Stakeholders Empowerment Services (SES), only 14 out of 48 PSUs surveyed were found to be fully complaint as on September 2018. While 22 PSUs were non-compliant with laws relating to the composition of their Board of Directors, 17 failed to spend the required amount on CSR activities. Others were non-compliant with rules regarding the composition of audit committees, nomination and remuneration committees and having an adequate number of independent directors. In fact, although the requirement of having at least one woman independent director on the boards of the top 500 listed companies kicked in from April 1, 2019, 27 per cent of the NSE top 500 companies, as on March 2019, failed to comply with this requirement.
But, evaluating data of the last four years based on two important areas — company boards and woman directors (see chart) — indicates that PSUs are moving towards improved compliance over the course of time. Yet, governance challenges still remain and further reforms are needed to build on the gains that have been achieved, SES said.
Source: PSUs remain laggards in corporate governance- The New Indian Express