There is no major cause for worry on the imposition of heavy penalties by the U.S. capital market regulator on the erstwhile Satyam Computers, Union Minister of State for Corporate Affairs Salman Khurshid said here on Tuesday. Replying to a query, Mr. Khurshid said he would not comment on this issue as there was no formal communication, but there were indications that “things were on track”.
The financial irregularities committed by the previous management of the company are being investigated by the U.S. market regulator and it was feared that the company would face heavy penalties. Satyam has now been taken over by Tech Mahindra.
On the issue of independent directors, the Minister said his Ministry had looked at the larger issues involved and felt that there was a need to bring clarity on the role of independent directors on the board of a company. “The entire structure of the relationship has to be looked at,” he said, adding that the Ministry was suggesting that before taking office, a director should go through an orientation programme and be clearly told his responsibilities and liabilities. He should sign a document to this effect.
He said the views of SEBI on the role of independent directors would be clarified in the New Companies Bill, which is likely to be tabled during the monsoon session of Parliament. The Parliamentary Committee response on SEBI views was being awaited, the Minister said.
Mr. Khurshid, who earlier spoke at a meeting on convergence with the International Financial Reporting Standards (IFRS) which has become mandatory by 2011, said IFRS was not about promoting honest or dishonest practices but it was about efficiency. “It is like trying to give Indian accounting a single international language,” he said, in reply to a question on whether transiting to IFRS from the Indian Generally Accepted Accounting Practices (IGAP) will prevent another scam like Satyam.
The <inister also launched IFRS ‘clinics’ (a joint initiative of KPMG and the Indian Chamber of Commerce) to help understand the nuances of IFRS implementation.
The issue of independent directors’ role came up during questions on the Bhopal tragedy too, with the Minister saying that whether it was a financial scandal or a Bhopal tragedy, one could not be swept away by emotions. He said in the case of the Bhopal tragedy, the larger issue was how quickly can compensation be given to the victims of a large-scale incident, He said that adequate provisions needed to be made and a regulatory framework was needed for providing adequate compensation.
He also said that the proposal on merging the Department of Public Enterprises, now under the Union Heavy Industry Ministry, with his Ministry was before the Cabinet Secretariat, but some other reorganisation was also necessary before this could be effected.