Finance Minister Pranab Mukherjee said he’d like companies to voluntarily adopt good governance and corporate social responsibility (CSR) practices, rather than be legally compelled to do so. Pranab Mukherjee Such voluntary contributions should be recognised and rewarded, he said, in an address at the 10th National Awards for Excellence in Corporate Governance event, organised by the Institute of Company Secretaries of India here today.
He said no system was immune to corporate fraud. “There must be self-control brakes within the system. Ethics and governance are some such brakes that will help the corporate world,” he said.
Highlighting the responsibility of companies to participate in India’s great infrastructure development story, Mukherjee wanted them to ensure progress in health and education to make growth inclusive.
“The key to that is corporate governance. We need to introspect and understand that better governance standards cannot be imposed by the law or by courts”, the minister said, adding that unless Indian companies were willing partners in inclusive growth, corporate governance could not happen.
Mukherjee said the post of independent director on a company’s board should not be seen as an ornamental post or a superannuation park. He distinguished between ethical party transactions and the ones that jeopardised minority shareholders’ interest for the private ones of the promoter.
CSR, he said, was more than just an allocation of funds. “When a pharmaceutical company invents, produces and sells life-saving medicines at reasonable cost, that itself becomes CSR. But if the company tries to maximise the cost of medicines sold to the people, it exists just for itself,” Mukherjee said.
Corporate governance, he said, encompassed all activities of a company.
The minister’s views come at a time when the parliamentary panel that examined the draft Companies Bill suggested introduction of a mandatory CSR levy of two per cent of net profit, under the proposed law.
Earlier, Larsen and Toubro and Dr Reddy’s Laboratories were conferred the ICSI National Award for Excellence in Corporate Governance 2010. The jury identified five companies – CMC Ltd, GAIL India, Oil and Natural Gas Corporation, Persistent Systems and Union Bank of India – as top contestants for the award.