Many CPSEs not complying with corporate governance norms: CAG

NEW DELHI: A large number of central pubic sector enterprises (CPSEs) were not complying with compulsory corporate governance guidelines prescribed by the Department of Public Enterprises, government auditor CAG said today.
Observing a departure from mandatory corporate governance norms, CAG found that there was no independent director on the board of 18 CPSEs, including Jute Corporation of India, Delhi Metro Rail Corporation, and Cotton Corporation of India, among others.

In view of the "continuous and recurring instances of non-compliance" of DPE guidelines, CAG recommended that a "dedicated mechanism either in the Ministry of Finance or DPE may be instituted so that all issues of non-compliance are addressed through regular and critical review".

In terms of Clause 49 (I)(A)(ii) of listing agreement and the Department of Public Enterprises (DPE) guidelines, where the Chairman of the Board is a non-executive director, at least one-third of the Board should comprise of independent directors and in case he is an executive director, at least half of the Board should comprise of independent directors.

The CAG report also found that J & K Development Finance Corporation Ltd had only one independent director as against the requirement of three independent directors on its Board.

Moreover, as many as eight CPSEs had more than two government directors on their Board.

These include Karnataka Trade Promotion Organisation; Delhi Metro Rail Corporation; National Centre for Trade Information; J & K Development Finance Corporation; Aurangabad Textiles and Apparel Parks; New City of Bombay Manufacturing Mill Ltd; Madhya Pradesh Ashok Hotel Corporation; and Indian Trade Promotion Organisation.

The DPE guidelines stipulate that government directors should not exceed one-sixth of the actual strength of the Board of Directors and it is preferable to have only one representative from the government on the Board.

The CAG report for 2013-14 also found that six CPSEs including NEEPCO; Central Mine Planning and Design Ltd; REC Transmission Projects Company Ltd; REC Power Distribution Company Ltd; Bharatiya Nabhikya Vidyut Nigam Ltd; and Nuclear Power Corporation of India Ltd had not formulated a CSR and sustainability policy so far.

CAG found that there was no whistleblower mechanism in nine CPSEs including Delhi Metro Rail Corporation; India United Textile Mill; Goldmohur Design & apparel Parks; Apollo Design and Apparel Parks; National Textile Corporation; New City of Bombay Manufacturing Mill Ltd; British India Corporation; Aurangabad Textiles & Apparel Parks; and J & K Development Finance Corporation.

Moreover, a risk policy was yet to be evolved in nine CPSEs including Spices Trading Corporation; Pondicherry Ashok Hotel Corporation; Tamil Nadu Trade Promotion Organisation; Mineral Exploration Corporation Limited; Delhi Metro Rail Corporation; India United Textile Mill Ltd; National Textile Corporation; New City of Bombay Manufacturing Mill Ltd; and Aurangabad Textiles and Apparel Parks Ltd.