Govt for debate on compliance norms for SMEs

In a bid to encourage corporate governance in the country, the government today called for a debate on compliance norms for small and medium enterprises and family-owned businesses.

"The vast majority of companies that make up the Indian corporate sector comprises of small and family-owned businesses. Therefore, a debate is necessary as to what should be the compliance norms for small and medium enterprises," Company Affairs Minister P C Gupta said here.

He was speaking at a conference on "2006 policy dialogue on corporate governance in India", organised by the Confederation of Indian Industry (CII).

The company affairs minister also said there was a need to inculcate the spirit of voluntary compliance among Indian corporates.

"We do not believe that corporate governance norms should be followed simply because the law says so. This will not serve the desired purpose. The provisions must be flexible enough to encourage voluntary compliance without imposing a heavy cost on such companies," he said.

Gupta added that companies having sound corporate governance practices stood a better chance of attracting investments from financial institutions.

Speaking on the occasion, World Bank Country Director Michael Carter said, "Corporate governance is a critical element of sustainable private sector development. Strengthening corporate governance is critical to fostering growth, improving access to capital, ensuring appropriate risk management, increasing productivity and competitiveness and supporting the fight against corruption."

Carter pointed out that implementation of corporate governance was a key problem in India. Improvements were needed to the extent of director's liability, he added.

"Corporate governance of specialised intermediaries such as banks, collective investments schemes, institutional investors that invest in fiduciary capacity and state-owned enterprises were areas where policy makers and international financial institutions should focus," Cartner added.