Do soul searching, improve biz practices: CAG to India Inc

Concerned over ethical deficit among corporates, government auditor CAG today asked India Inc to do some "soul searching" and improve business practices.

"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 and Auditor General of India Vinod Rai said here.

Speaking at the national conference and annual session of industry chamber CII, he said that 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.

Besides, the government has also come in for renewed pressure due to the fast-unto-death by activist Anna Hazare and his group who are demanding an effective Lokpal bill.

"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 CAG said, adding his support for provision of independent directors.

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 CAG 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.

"Appropriate policies and procedures have to be devised and enforced to help eliminate unacceptable behaviour and work habits. This is important to build trust and confidence," Rai said, adding that the legal and regulatory framework that impacts corporate governance practices has to be strengthened.

According to him, there should be clear cut authority and resources for fulfilment of duty by supervisory and regulatory authorities should have clear cut authority and resources to fulfil their duties.