DARE - Because Entrepreneurs Do

I am sure none of us would have forgotten the heated debate on corporate governance and the role of independent directors after the Satyam fiasco last year. The IT company was left in shambles by its founder Ramalinga Raju as a result of an accounting fraud. The role of independent directors on the Satyam board came in under severe criticism from all sides leading the government, industry and accounting bodies to look at the corporate governance norms afresh. 

The three musketeers -- Kiran Karnik, Deepak Parekh and C Achuthan -- who revived the embattled Satyam, recently shared an award for the Best Business Leader given by a prominent TV channel. The team surely deserved appreciation for picking up the pieces to stitch together the firm that was once the cynosure of all eyes. The trio were brought in to put the Satyam house in order after Raju told the world that he and his associates cooked up accounting books and fraudulently siphoned off money. The company has finally been taken over by Tech Mahindra, the IT arm of Mahindra & Mahindra. 

Fresh Guidelines

A set of fresh guidelines on corporate governance have been issued by industry association CII. Prepared by a task force chaired by Naresh Chandra, the report has made recommendations regarding the appointment of independent directors and non-executive directors, their duties, liabilities and remuneration, the separation of the office of a company's chairman and the CEO, among others.

The task force has also talked of the role of auditors, who allegedly worked hands in glove with Raju to commit fraud. On of its recommendations is that the partners handling the audit assignments of a listed company should be rotated after every six years. It has also talked of a cooling off period of 3 years before a partner can resume the same audit assignment.

One of the prominent recommendation is regarding the safeguard of whistle blowers. It has asked for the setting up of a proper mechanism for employees to report concerns about unethical behavior, actual or suspended fraud or violation of company's code of conduct or ethics policy.

Will anyone follow? 

These are only guidelines and not mandatory so far. The Union Ministry of Corporate Affairs would now seek comments, questions and suggestions from the general public before considering making all or some of these recommendations binding. 

The big question here is that will the companies implement these far-reaching recommendations. For instance the one on providing safeguards to whistle blowers within an organization. If the senior and top management indulge in mis-governance, the employee who points that out should not be threatened.

Similarly, on independent directors attending meetings. Remember that in Satyam's case, many of the directors said they were not present during the crucial board meetings. The task force has said that if a director wants to be present in board meetings but cannot physically be present at the meeting, then "a minuted and signed proceedings of a tele-conference or video-conference should constitute proof of his/her participation.

Do you think corporate India would follow these guidelines?