Financial Daily from THE HINDU group of publications
Thursday, Feb 20, 2003
Financial Daily from THE HINDU group of publications Thursday, Feb 20, 2003 |
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Corporate
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Corporate Governance Whole-time EDs may not be allowed to head audit panels
Richa Mishra
NEW DELHI, Feb. 19 MANAGING or whole-time executive directors of public companies are likely to be barred from being appointed as a chairman of audit committees. A working group on corporate governance constituted by Department of Company Affairs (DCA) is set to recommend that only independent non-executive directors appointed on a rotational basis should be appointed as chairman of the audit committee. The Companies Act currently requires members of the audit committee to elect a chairman from amongst themselves. It, however, does not stipulate that all members of the audit committee should be independent. The view of the working group on the appointment of the chairman of the audit committee is being strongly opposed by a section of the industry, which feels that there is no justification for this suggestion. Meanwhile, the Government is already in the process of revamping the structure, composition and procedures involved in the functioning of the audit committees in the companies. This follows a host of corporate failures in India and abroad. Sources said that, "the working group is set to recommend that in the event of inability of the chairman of the audit committee to attend the annual general meeting (AGM), any member of audit committee may be authorised by its chairman to attend the AGM. The Companies Act requires the chairman of the audit committee to attend the AGM of the company to provide any clarification on matters relating to audit." Industry sources said that the regulatory regime for audit committees is set to become more complex with varying models and suggestions coming up for debate. In the US, Sarbanes-Oxley Act has now made it mandatory for all members of audit committees to be independent directors who are also on the board of the same company. Back home the Naresh Chandra Committee on Corporate Audit and Governance had recommended that audit committees of all listed companies as well as unlisted public limited companies with a paid up capital and free reserves of Rs 10 crore and above or turnover of Rs 50 crore and above should consist exclusively of independent directors.
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