ACCOUNTABILITY OF COMPANY SECRETARIES ON MAXIMISATION OF GOVERNANCE:
Introduction:
Corporate Governance is an art of managing companies ethically and efficiently for enhancing stake holder’s value. The entire gamut of CG system could be referred to as “corporate ethical and values system”. It is in this context, Company Secretaries play a crucial role for the dynamic and vibrant growth and development of the corporate sector and to maximize corporate governance practices. The scope of the company secretaries in employment and in practice has increased by the introduction of mandatory secretarial compliance certificate. The role of modern company secretaries will be studious with the increased stern of self regulation in place of controls, the focus on corporate governance and compliances issues and impact of information technology on industry. Corporate Governance for the corporate sector can’t depend on more laws and regulations. Hence, an attempt was made to highlight the issues in good corporate governance and effective role played by the Institute of Company Secretaries of India for corporate Governance.
Need for Good Governance
Scandals involving corporate which enjoyed the implicit trust of the investors were taken to be the last word in Business ethics and sound management have raised disturbing questions about the quality of control and supervision of ‘Boards’, auditors discipline, accountability of chief executive officers, chief finance officers, corporate Secretaries, role of credit rating agencies, financial statement and reporting, norms of rating systems and so on.
The standards of corporate governance was poor during the earlier decades dominated by family business houses. In Recent years, there have been innumerable instances of corporate investing in unrelated areas, dabbling in the stock market, diverting funds borrowed from banks and financial Institutions and the like. The recent past has also witnessed numerous scams, such as, Har Shad Mehta scam, the UTI Scam, the vanishing companies scam, satyam episode and the like. In all these scams, there was active involvement of corporate entities. In such a situation, there is a need for radical changes in corporate governance standards through a proper ‘code of conduct’.
The need and significance of good corporate Governance could be emphasized by the size and influence of corporate some of which are larger then state Government. The regulator should not be obsessed with quarterly results of corporate. It should require lengthy reviews and huge efforts especially when the company is large and diversified. Such mandatory requirements would put enormous pressure on companies and could force people to put out information that may not be entirely accurate. Many items to be deliberated upon -by company Boards need lengthy review which in normal course become cumbersome and impractical. This leads to check list Governance which is nothing but making sure that the company has done everything that the regulator directed to do and is not pulled up for non-compliance. Several companies indulge in checklist corporate Governance because of the mere regulatory requirement.For instance, the subject of corporate Governance fall under the supervision of company secretaries and therefore the regulator need to utilise the service of chartered secretaries for corporate Governance compliance.
CRISIL, a credit rating institution has rated the companies on the basis of creation of wealth for the stake holder, sound corporate governance practices. CRICIL’s exercise is in keeping with the global trends towards transparent and clean corporate practices. CRICIL has given importance to the past trends and future expectations of the rated companies. The rated companies are on a strong background in terms of both the parameters. CRISIL ratings are a small beacon to the future trends. It is not surprising to note CRISIL’s statement – Corporate Governance practices in the rated companies were moderate as compared to Global practices.
Suggestions:
¨ Annual Accounts of Companies have to be certified by Company Secretaries in addition to auditors and Chief Finance Officers.
¨ Quarterly review Boards to be set up by ICSI.
¨ It should be made mandatory that secretarial auditors should forward copies of qualified corporate accounts to SEBI, ROC and Stock Exchanges.
¨ Audit Committees are to be manned by independent company secretary in addition to directors.
¨ DCA should set up a crime branch/division to deal with bigger corporate crimes.
¨ Amendment of Companies Act to enable DCA to order compliance of secretarial audit and also provide it with powers of attachment of bank accounts to ensure that proceeds from illegal acts and frauds do not escape recovery.
¨ Improve the prevailing corporate governance standards in Government, bank and financial institutions and regulatory bodies.
¨ Better corporate governance standards make banks and rating agencies perceive the companies in a better light. This means lower borrowing costs for well-governed firms.
The ICSI has sought a remarkable role for itself in today’s corporate environment. Company Secretary’s can function as an extended arm of the market regulator ‘SEBI’ to facilitate better compliance of its rules and regulations. With Greater emphasis on corporate governance today and for better compliance of the prescribed norms, the services of company secretaries can be better utilized. ICSI has to interact with the market regulator to enable it to play its role. Furthermore, in order to regulate the corporate governance compliance, SEBI could make use of the services offered by the practicing company secretaries. The market regulator expects the corporate to comply with the corporate governance norms. Since the number of companies to be monitored is more in number and SEBI has limited resources it can therefore “outsource” the services of company secretaries for the purpose. Also for compliance of listing agreement norms too, it can make use of their services. Company Secretaries may also be used as intermediaries. The ICSI should function as a vehicle of ‘regulatory compliance’ for SEBI to ensure good governance.
In the Indian situation, unless issues relating to weaknesses prevailing in corporate governance are well addressed, it would be futile to expect good standards of corporate governance. As far as the legal and administrative frame work is concerned, it is felt that SEBI and ICSI must introduce new measures, as there is no clear legal framework for punishing erring companies that fail to follow guidelines, corporate Governance practices and code of conducts. Further, with a view to promote the best corporate governance practices, secretarial audit should be made mandatory for all the institutions.
Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He currently teaches financial management and Research Methodology Subjects in Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
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