Reflect on ethical deficit, CAG tells Corporate India

Corporate scandals have severely dented the countrys image

 “Business practices of some corporate houses have become the subject of increasing public scrutiny for their perceived ethical deficit. Corporate India needs to go through a phase of reflection and soul searching,” Comptroller & Auditor General of India Vinod Rai said here.

Speaking at the CII national conference and annual session, he said recent corporate scandals have tarnished the country’s image at a time when the economic growth has been good.

“The Satyam saga caused enormous damage to the India Shining story. In recent times, corporate scandals in sectors like telecom and mining have caused widespread dismay at the current state of governance,” Rai said.

His comments come at a time when the Government has come up with the Companies Bill 2009 which contains provisions for independent directors and change of accounting firms at regular intervals. Some of the provisions of the Bill has been opposed by the industry.

"The quality of financial reporting adopted by the companies needs to be substantially improved. Companies should follow high disclosure standards. The risk factors and off balance sheet items affecting company’s performance should be adequately disclosed”  the Comptroller & Auditor General said, adding his support for provision of independent directors.

Accountable governance

Stating that focus has shifted towards the need for urgent improvement in business practices, Rai said there is pressure to provide transparent and accountable governance and address concerns relating to accurate and fair accounting, fair practices and socially responsible behaviour.

“A sound policy on corporate governance, business ethics and corporate social responsibility to regain public trust and overcome the environment of negativity has become a necessity. Corporate culture must be in consonance with the best practices relating to transparency, accountability and good governance,” he said.

The Comptroller & Auditor General added that companies need to integrate ethics into corporate culture and go for a balance between the need for embracing a stringent code of conduct and standards of business.

Display strength

“In doing so we will all be providing an element of vigilante which will keep the government on its toes. There is already considerable pressure and media glare on government functionaries making them aware that they live and function in glass houses, that all their actions have to be transparent and the public can hold them accountable for acts of misdemenour,” Rai said.

Calling upon the “silent majority” to display its strength, Rai said it has a responsibility to challenge the government. “It is this majority which has remained silent till now and which will have to display its courage of conviction and ensure that it can restore every common citizen its rightful due and that in fact a government functionary actually performs as a government servant and not master of the citizenry,” Rai said.