For over a decade, the Confederation of Indian Industry (CII) has been at the forefront of the corporate governance movement in India. In April 1998, it released a Task Force report entitled “Desirable Corporate Governance: A Code”, which outlined a series of voluntary recommendations regarding best-inclass practices of corporate governance for listed companies. It is worth noting that most of the CII Code was subsequently incorporated in SEBI’s Kumar Mangalam Birla Committee Report and thereafter in Clause 49 of the Listing Agreement. Moreover, the CII Code was the first and probably a unique instance where an industry association took the lead in prescribing corporate governance standards for listed companies.

Corporate governance guidelines - both mandated and voluntary - have evolved since 1998, thanks to the efforts of several committees appointed by the Ministry of Corporate Affairs (MCA) and the SEBI. Indeed, it is fair to say that in terms of norms, guidelines and standards set for the board of directors, financial and non-financial disclosures and information to be shared by the management to stakeholders and the wider public, Indian corporate governance standards rank among the best in the world. And CII is privileged to be a part of this movement.

Unfortunately, history tells us that even the best standards cannot prevent instances of major corporate misconduct. This has been true in the US - Enron, Worldcom, Tyco and, more recently gross miss-selling of collateralised debt obligations; in the UK; in France; in Germany; in Italy; in Japan; in South Korea; and many other OECD nations. The Satyam-Maytas Infra-Maytas Properties scandal that has rocked India since 16th December 2008 is another example of a massive fraud.

Satyam is a one-off incident - especially considering the size of the malfeasance. The overwhelming majority of corporate India is well run, well regulated and does business in a sound and legal manner. However, the Satyam episode has prompted a relook at our corporate governance norms and how industry can go a step further through some voluntary measures.

With this in mind, the CII set up a Task Force under Mr Naresh Chandra in February 2009 to recommend ways of further improving corporate governance standards and practices both in letter and spirit.

The recommendations of the Naresh Chandra Task Force evolved over a series of meetings. The leitmotif of the report is to enunciate additional principles that can improve corporate governance in spirit and in practice. The report enumerates a set of voluntary recommendations with an objective to establish higher standards of probity and corporate governance in the country.

The recommendations outlined in this report are aimed at listed companies and wholly owned subsidiaries of listed companies.

Another comment is in order. Large, highly visible and publicised corporate scandals often provoke legislative and regulatory actions. CII advocates caution against over-regulating. It needs to be recognised that while the super-structure of corporate governance is built on laws and regulations, these cannot be anything more than a basic framework. Much of best-in-class corporate governance is voluntary - of companies taking conscious decisions of going beyond the mere letter of law. The spirit of this Task Force Report is to encourage better practices through voluntary adoption - based on a firm conviction that good corporate governance not only comes from within but also generates significantly greater reputational and stakeholder value when perceived to go beyond the rubric of law.

Therefore, it is only natural that this report should focus on recommendations, which are being placed before corporate India for adopting voluntarily. It is the belief of CII that Indian Industry would respond spontaneously and help set standards, which would define global benchmarks in the medium term.