The government must change its attitude to state-owned enterprises
It is good that the chairman of the Oil and Natural Gas Commission has dared to publicly oppose the petroleum ministry’s attempt to pack the ONGC board with more ministry officials as nominees and that the minister has overruled the bureaucrats. There are broader issues at stake here than of bureaucratic egos. They relate to corporate governance, managerial autonomy in state-owned enterprises and conflicts of interest when government is both regulator and participant.
The Securities and Exchange Board of India has issued guidelines for listed companies under clause 49 of its listing agreement to be enforced from December 2005. But many private companies started implementing them well over a year ago. This rule requires that a listed company have half its board as independent directors if the chairman is an executive. The rule applies to all listed companies. State-owned enterprises could not be exceptions. Indeed, as the rule maker, the government should have applied it to all its enterprises, listed or not.
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