13th February, 2016 (MAINS)

TODAYs ANSWER WRITING CHALLENGE FROM GS-II

Q1. In the light of the Satyam Scandal (2009), discuss the changes brought in corporate governance to ensure transparency, accountability.

[12.5marks/2015/GS-2] 200 words.

Please write answer in the comments section.

  • Ashi Agarwal

    Ans- After the scandal national Association of Software and Services Companies established a corporate governance and ethics committee
    headed by Narayana Murthy. The report of the latter addressed reforms relating to audit committees, shareholder rights, and whistleblower
    policy. SEBI’s committee on disclosure and accounting standards issued a discussion paper in 2009 to deliberate on (i) the voluntary
    adoption of international financial reporting standards; (ii) the appointment of chief financial officers by audit committees based on
    qualifications, experience, and background; and (iii) the rotation of auditors every five years so that familiarity does not lead to corporate
    malpractice and mismanagement. In 2010, SEBI amended the Listing Agreement to include the provision dealing with the appointment of a
    chief financial officer but it did not insist on the compulsory rotation of auditors.
    In 2009, the Ministry of Corporate Affairs also released a set of voluntary guidelines for corporate governance, dealing with the
    independence of directors, the roles and responsibilities of audit committees and the boards of companies, whistleblower policies, the
    separation of the offices of the chairman and the CEO to ensure independence and a system of checks and balances, and various other
    provisions relating to directors such as their tenures, remuneration, evaluation, the issuance of a formal letter of appointment, and placing
    limits on the number of companies in which an individual can be a director.
    Reforms for better corporate governance has laid company predictable , transparent and accountable. It is much beneficial for shareholders,
    directors, owners and employees too.