Public sector undertakings (PSUs) functioning in the state without the desired strength of independent directors on their boards have come under attack from the department of public enterprises (PE).
Stating that induction of independent directors is a compulsion under the 'Corporate Governance Manual' of the state government, the PE department has urged the PSUs to complete the exercise of appointing independent directors on their boards as per norms fixed in the manual within 30 days.
The department has also instructed the state run undertakings to intimate it on their present size of their board of directors along with the number of independent directors in 15 days.
"Consequent upon implementation of corporate governance manual by government in PE department, it has become mandatory for all state PSUs to ensure that at least one-third of the members of their board of directors are independent directors. But it is observed that the board of directors of some PSUs has independent directors disproportionately whereas in some PSUs they have not appointed any independent director. As a result, the very purpose of induction of independent directors has been defeated”, Ashok Tripathy, principal secretary, PE department stated in a letter to the chief executives of all state PSUs.
Presently, 33 PSUs were operational in the state out of which 27 were making profits.
As part of its PSU reforms exercise, the PE department had developed a corporate governance manual which was approved by the State Cabinet in November 2009.
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The manual was developed with the objectives of defining the roles and responsibilities of the board and its committees, facilitating the directors and the management in fulfilling their responsibilities, improving accountability in reporting, improving compliance with statutory and regulatory requirements and enhancing awareness among employees about the importance of good governance.
According to the manual, the mandate for each PSU would be prepared by the secretary heading the administrative department governing the PSU in consultation with the Chief Secretary, PE secretary and officials from the department of finance and planning & coordination.