The government may empower independent directors and company secretaries to enforce corporate governance norms, having made compliance voluntary for enterprises. The Institute of Company Secretaries of India (ICSI), a statutory body set up by the government, has suggested a set of best practices that company secretaries on board of companies have to follow.
“It is important that company secretaries have the courage, skill and knowledge to question policies wherever they contravene regulatory norms,” said NK Jain, secretary and CEO of ICSI. The regulator has been conducting training programme for independent directors on behalf of the government to help them check arbitrary decision making by company managements. Company secretaries advise board of directors on best practices in corporate governance and is responsible for all regulatory compliances.
The norms, which have been prepared by the Corporate Secretaries International Association, a global charter of company secretaries in which ICSI is a member, are largely incorporated in the ministry of corporate affairs’ voluntary corporate governance guidelines. “The idea is to have a functional code for company secretaries, based on which they can challenge company policies that do not conform to good governance practices,” said a ministry official. As company secretaries could be close to the board of a company, a performance guide for the profession is expected to help bring more effectiveness to their role.
This could empower company secretaries allowing them to question and challenge the company’s policies and ensure that the management takes steps to promote good governance. Some of the key aspects of the new norms pertain to the formulation of ethical standards in companies as regards their interaction with the government and regulators, separating the roles of chairmen and chief executives (CEO) in a company and making them more receptive to corporate social responsibility.
The need to strengthen the functioning of these professionals was felt after the Satyam scandal where the company’s erstwhile management did not effectively allow the professionals to question its policies. While the company secretary of Satyam Computer Services has not been directly found guilty of failing in his responsibilities, the government wants the role of a company secretary to be more accountable for wrong decision making.
While the role of company secretaries and independent directors is aimed at ensuring regulatory compliance and due diligence, often these professionals are controlled and made to function on the commands of the company management, hence they fail to take an independent view on a given situation, the government official said, requesting anonymity.