Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs)

Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs)

The Union Cabinet today approved the continuation of Guidelines on Corporate governance for Central Public Sector Enterprises (CPSEs) on mandatory basis.

The Guidelines have now been made mandatory and are applicable to all CPSEs.  The guidelines cover issues like composition of Board of CPSEs, Audit Committee, Subsidiary companies, Disclosures, Code of conduct and ethics, risk management and reporting.

The Guidelines have been modified and improved keeping in view the experience gained during the experimental phase of one year and includes additional provisions relating to monitoring the compliance of Guidelines by the CPSEs and formation of Remuneration Committee.  Since, the concept of corporate governance is dynamic in nature, it has also been provided that suitable modifications in these Guidelines would be carried out to bring them in line with prevailing laws, regulations, acts etc. from time to time.

The continued implementation of these guidelines on Corporate Governance for CPSEs will facilitate protection of interest of shareholders and other stakeholders and also ensure transparency in the operations of CPSEs.

BACKGROUND

The Government had in June, 2007 introduced the guidelines on Corporate governance for CPSEs, which were voluntary in nature, for an experimental phase of one year. 

It was felt that while the principles of corporate governance apply equally to both the public and private sector, there was a continued need to adopt and apply the good Corporate Governance practices in respect of CPSEs where huge public funds are invested.  The continued need for adoption of good Corporate Governance principles has been reinforced in the light of recent events in the corporate world.  Thus, after due inter-ministerial consultations, the proposal for introduction of Guidelines on Corporate governance for CPSEs on mandatory basis was approved.

Cabinet Decision

The Union Cabinet today approved the continuation of Guidelines on Corporate governance for Central Public Sector Enterprises (CPSEs) on mandatory basis.

The Guidelines have now been made mandatory and are applicable to all CPSEs.  The guidelines cover issues like composition of Board of CPSEs, Audit Committee, Subsidiary companies, Disclosures, Code of conduct and ethics, risk management and reporting.

The Guidelines have been modified and improved keeping in view the experience gained during the experimental phase of one year and includes additional provisions relating to monitoring the compliance of Guidelines by the CPSEs and formation of Remuneration Committee.  Since, the concept of corporate governance is dynamic in nature, it has also been provided that suitable modifications in these Guidelines would be carried out to bring them in line with prevailing laws, regulations, acts etc. from time to time.

The continued implementation of these guidelines on Corporate Governance for CPSEs will facilitate protection of interest of shareholders and other stakeholders and also ensure transparency in the operations of CPSEs.