Keeping in view the importance of Corporate Governance principles in ensuring transparency and enhancing the trust of stakeholders, the Government had, in 2007, approved the Guidelines on Corporate Governance for Central Public Sector Enterprises (CPSEs). These guidelines were formulated by the Department of Public Enterprises (DPE) keeping in view relevant laws, instructions and procedures.
Since the issue of these Guidelines in June, 2007, the CPSEs have had the opportunity to implement them for the whole of the financial year 2008-09. 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, it was decided to continue the Guidelines on Corporate Governance for CPSEs and after due inter-ministerial consultations, the proposal for introduction of Guidelines on Corporate Governance for CPSEs on mandatory basis was approved by the Government in March, 2010.
These Guidelines have now been made mandatory and are applicable to all CPSEs. The Guidelines cover issues like composition of Board of CPSEs, Audit Committee, Remuneration 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 DPE has also issued guidelines for grading the CPSEs on the basis of their compliance with Guidelines.