CORPORATE

GOVERNANCE IN PSUs

2/7/2010 CORPORATE GOVERNANCE IN PSU 1

 PRESENTED BY:
 
Rohan D’Souza (019)
Archana Dalal (020)
Anuj Kumar (054)
Salman Ali Sayed (094)
Parminder Singh (102)
Rakesh Kumar Singh (103)
Praneet Tak (106)

2/7/2010 CORPORATE GOVERNANCE IN PSU 2

 TRENDS IN CORPORATE
GOVERNANCE IN THE PUBLIC
SECTOR

Considered a serious issue in the public sector :

 Excessive confidentiality in decision making
 Inefficiency in public expenditure

Now greater demand for:

 Openness & accountability in government, with
 Greater willingness to challenge decisions

2/7/2010 CORPORATE GOVERNANCE IN PSU 3

 GOOD CORPORATE GOVERNANCE

 Lower cost of capital by reducing risk & creates higher firm

valuation once again boosting real investments.

 Removes mistrust between different stakeholders, reduce

legal costs & improve social & labor relationships &
external economies like environmental protection

2/7/2010 CORPORATE GOVERNANCE IN PSU 4

 STATUS OF PSUs
Maharatna

Navratna 18

Miniratna Category-I 48

Miniratna Category-II 14

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 INTEGRITY
INTEGRITY
RELIABILIT
RELIABILIT
YYAND
AND
PREDICTABI
PREDICTABI
LITY
LITY

EFFICIENCY
EFFICIENCY
AND
AND
EFFECTIVE
EFFECTIVE

CODE OF
CODE OF
CONDUC
CONDUC
T
T

ACCOUNTAB
ACCOUNTAB
ILITY
ILITY

OPENNESS
OPENNESS
AND
AND
TRANSPARE
TRANSPARE
NCY
NCY

2/7/2010 CORPORATE GOVERNANCE IN PSU 6

 POWER
WEALTH
WEALTH

POVERTY
POVERTY CONTRIBUTI
CONTRIBUTI
ERADICTION
ERADICTION ON TO
ON TO GDP
GDP

UPLIFTMEN
UPLIFTMEN
T OF
T OF FORCE
FORCE
SOCIETY
SOCIETY

INCOME
INCOME
FDI
FDI AND
AND
EMPLOYMENT
EMPLOYMENT
INFRASTR
INFRASTR
UCTURE
UCTURE

2/7/2010 CORPORATE GOVERNANCE IN PSU 7

 GUIDELINES FOR CPSE FOR LISTED COMPANY

Clause 49 of the Listing agreement with

Stock Exchanges issued by (SEBI)
DPE, the CPSEs are governed
by the Companies Act, 1956
& regulations of various
authorities like Comptroller
& Auditor General of India
(C&AG), Central Vigilance
Commission, Administrative
Ministries, other Nodal
Ministries
RTI 2005 is also applicable to the CPSEs.
2/7/2010 CORPORATE GOVERNANCE IN PSU 8
 GUIDELINES FOR CPSE FOR NON-LISTED
COMPANY

 The non-listed CPSEs may follow the Guidelines on Corporate

Governance, which are voluntary in nature.

 The listing of the non-listed CPSEs in the stock exchanges

may also be considered within a reasonable time frame to be
set by the Administrative Ministry concerned in consultation
with the CPSEs concerned.

2/7/2010 CORPORATE GOVERNANCE IN PSU 9

 CODES AND PRINCIPLES
 Responsibility of the Board: Most of the provisions in the Companies
Act regarding role/responsibility of the Board also apply to the
Government companies.

 Accountability to Shareholders/ Stakeholders

 If the Govt. has stake of more than 51% than according to DPE
guidelines, the part-time Chairman can call for information, but this
should be appropriately done through the MD

2/7/2010 CORPORATE GOVERNANCE IN PSU 10

 ELECTION

 At least 2/3rd of total directors should retire by rotation at AGM.

 Remaining 1/3rd may be appointed for life-term or for a fixed

duration in the general meeting.

 At every AGM, 1/3rd of those liable to retire by rotation shall

retire from office.

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SIZE
 Composition of the members of the board of PSE are
Functional Directors
Government directors
Non Official Directors

INDEPENDENCE
 Director nominated by Govt. should not be considered
 Independent
 A majority of non-executive directors should be independent of management
and free from any business or other relationship that could interfere with
their independent judgments.

 Majority of Independent non-executive directors

 should be mentioned in Annual report

2/7/2010 CORPORATE GOVERNANCE IN PSU 12

 Clause
49
PRINCIPLES OF CORPORATE GOVERNANCE
Confidential Trustee of
Fair Dealing Information Company Assets

Corporate
Accountability
Opportunities

Conflict of Interest Transparency

Regularity Honest & Ethical

Compliances Disclosure of Conduct
Interests
2/7/2010 CORPORATE GOVERNANCE IN PSU 13
 CASE STUDY:

ONGC

 Fortune 500 company

 Most valuable company in terms of market capitalization

 Leader in oil & exploration

 80% of Total crude & Natural Gas produce in the country

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CORPORATE GOVERNANCE IN ONGC

 Company Philosophy - strong emphasis -

human values,
individual integrity & adherence to honest , ethical & professional conduct.

 Main objective incorporated in Corporate Governance are :

Transparency
Openness & Accountability

2/7/2010 CORPORATE GOVERNANCE IN PSU 15

 ADHERE TO CLAUSE 49 OF SEBI
 Implementing IT across organisation covering entire supply chain management bringing
more transparency

 1st Indian corporate to sign the Integrity Pact with Transparency International India Award
in 2006

 Right To Information

 Commendable endeavors of ONGC towards corporate governance resulted in the

organization receiving ‘NIL’ comments from Statutory Auditors & Comptroller & Auditor
General (CAG)
2/7/2010 CORPORATE GOVERNANCE IN PSU 16
 yo u
ank
Th

2/7/2010 CORPORATE GOVERNANCE IN PSU 17