Infosys gave no room for optimism while RS Software has posted excellent results. Be sure to...
While the government has approved RIL’s capital expenditure plan, it is still sitting over Cairn India’s plan for increasing production
Good sense and responsibility have played vital role in the steps taken by the Management Committee that oversees the operations of KG-D6 block, by conditionally accepting the annual budget, retroactively from 2010-11 for three years. Effectively, therefore, Reliance Industries (RIL) must show some tangible improvement in the next twelve months, so that work does not suffer again.
Petroleum minister, S Jaipal Reddy confirmed that “whatever the contractor (Reliance) needs technically and administratively to raise the production will be given, though such approvals may have conditions attached to them”.
The emphasis, therefore, has attached importance to increasing production from its current meagre level of 29 mmscmd (million metric standard cubic metres) from the 60 mmscmd it had achieved earlier.
Besides, if these steps are not taken, there is the inherent fear that the production may fall further down by 20 mmscmd by the next year.
It must be noted that, earlier, the Director General of Hydrocarbons had rejected the commerciality of three gas satellite finds of D 29, 30 and 31 but with this belated approval, RIL, BP and Niko will be able to go ahead with their proposed investment of $1 billion in their fields.
In a quid-pro-quo, Reliance has agreed to provide the Comptroller and Auditor General of India (CAG) access to records of the KG D6 block, which it had not provided earlier as a sequel to the adverse comments CAG had made earlier.
It is now hoped that RIL will now restart working in right earnest and raise the production levels to bring about much needed gas, at least to the 60 mmscmd level it had performed earlier, before reaching the original target of 80 mmscmd.
A passing reference may be made to the request that Anil Agarwal had made for the intervention of the prime minister to accord necessary permissions to facilitate increasing crude production by Cairn by an additional 175,000 barrels per day.
What is holding up the petroleum ministry in processing this request?
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
The gross corporate misdemeanors reported by Indian and overseas financial analysts make it imperative to revisit the process of appointment of independent directors and auditors—statutory and internal
The CBDT (Central Board of Direct Taxes) chairman-headed report on black money suggestion to set up a regulator to empanel statutory auditors for corporate India is a long overdue solution to the gross financial irregularities resulting in massive corporate frauds in GTB, Satyam and now Addidas-Reebook.
Corporate practices and good governance norms mandate that the board of directors induct some directors and appoint statutory auditors, both of which are expected to be truly independent, unconnected with companies/promoters/managements, completely free of conflicts of interests and insulated from the influences of the promoters or company management.
The most important and critical cogs in the wheel of good corporate governance are the offices of the statutory and internal auditors of companies who are well-read and experienced accounting and audit professionals in their own right having audited entities across the board and not anyone just practicing taxation.
The stake holders have tremendous of expectations from the auditors—both statutory as well as internal. The degree of care and diligence expected from both these functionaries has undergone sea change the world over. The stake holders, who are now more than the majority shareholders, no longer expect the auditors to provide them clean bills of health to corporate managements as was done hitherto. This is more particularly when more and more gross financial irregularities have been coming to light post audit. It began in the West with Lehman Brothers, Enron, Tyson, BCCI, Palmart, et al. In India with GTB and Satyam, and latest on the list Adidas-Reebok.
The reports of gross corporate misdemenours reported by Indian and overseas financial analysts—the mismanagement in a domestic airline company, different set of audited numbers submitted to the authorities by a telcom company, the veracity of results of a listed reality company questioned, alleged irregularities in a footwear company resulting in criminal complaints, all make it imperative to revisit the process of appointment and subsequent renewals of the auditors.
The other critical issue is—how long should the company managements alone be entitled to continue with the present practice of appointments of the independent directors and auditors only by an internal proposal moved by the board of directors? More particularly when both the directors as well as auditors being emboldened to their appointers—the company boards and managements and the appointees forfeiting whatever is left of the modicum of independence.
An independent regulator or body or panel has to maintain a data bank of eminent personalities and auditors to bring about more transparent appointments of independent directors and auditors more particularly for widely held companies with high public stakes. This appointment panel ought to be put in place in consultation with the regulators like SEBI, IRDA, TRAI, RBI, ICAI and ICSI.
Today there exits listings of audit firms with the Comptroller and Auditor General of India (CAG) and the Reserve Bank of India (RBI) containing authentic data. Similar listing of eminent qualified and experienced personalities needs to be created for selecting independent directors. It can be culled from retired auditors, directors and executives. The panel can propose at least three names to enable the company to select one.
This idea of outside oversight in the monitoring of company affairs has brought about the concept of independent directors who are eminent personalities and/or professionals to bring in vital inputs and advice on the boards of companies that generally constitute promoters’ or managements’ appointees as other members of the board of directors. Independent directors are considered critical pillars of corporate governance as effective tools of an oversight body to protect the interest of stakeholders like investors at large, more particularly minority interests, vendors, suppliers, employees and lenders.
Being external and unbiased, the independent directors are expected to bring about different perspectives and provide fillip with their qualifications and expertise striking a right balance between growth and governance. As effective contributors they bring in wider knowledge, experience, insight, skills and industry expertise for the company to profit when they voice genuine concerns, put out searching questions. They are also expected to have constant interaction with executive management, review company and industry publications—particularly from competitors and not merely accept the data submitted in the board folders containing discussion papers but to spend quality time, not merely putting in token presence or act as ornamental artifacts in the board room to collect fat sitting fees and commissions.
An AT Kearney study in 2007 reported that only 39% listed Indian companies followed any formal process of selecting members to their boards and that a whopping 90% of the so-called independent directors were picked out of the old boys’ networks of company chairmen or CEOs. There is a raging controversy over the appointment of a close relative on the board of Indian Hotels which violates the unchartered ‘independence’ norms. Taking advantage of grey areas?
This seeks to address the concerns of conflicts of interests in public appointments to protect the stake holders.
(Nagesh Kini is a Mumbai-based chartered accountant turned activist.)