"The cell will assist companies in applying corporate governance principles and listing," BSE president Anand Rathi said.

The cell, to be set up shortly, will enable the Exchange to market corporate governance by educating and persuading the companies in this regard, he said. Regretting that the powers of the stock exchange were `very limited', Rathi urged the government to make it a part of Company Law to give it more teeth.

Till last year, the exchange tried to bring errant companies to book by de-listing them, but that put investors in peril. "So now, we black-list them by declaring them `Z-category companies' to warn investors in advance," Rathi said.

Earlier, speaking at a seminar, Rathi argued strongly in favour of Clause 49 of Listing Agreement which lays down stipulations relating to corporate governance.

"The Clause has tried to create an environment in which corporates can pro-actively change-over to system of good governance".

Rathi said the Kumaramagalam Birla Committee report, which formed the basis of the Clause, pitched for safeguarding the interest of the investors to whom the industry was `primarily accountable'.

Responding to the managing director of Duncan Industries, Askar Banerjee, who complained that the stipulations only emphasised on protecting investors and were oblivious of the interests of customers and employers, Rathi asserted that there was no no conflict between the interests of investors and others.

Supporting the Clause provision that independent directors should play a pivotal role in ensuring compliance of corporate governance principles, Rathi said it would propel the companies to take independent directors who would "serve it usefully".

"This will bring to an end the present habit of corporate barons stacking the Board with their own men," he said.

Rathi, however, agreed with a suggestion that independent directors be financially compensated for their services. "Why should they work if you do not compensate them for spending their time and energy? You must pay them if you are sincerely willing to improve your functioning with their advice," he added.

Banerjee had argued that the regulations focussing on the role of independent directors was `flawed' as they were appointed by promoters. They continued in office as per the whims of promoters. Agreeing with a suggestion from former Institute of Chartered Accountants of India president PM Narielvala that the companies be given corporate governance certificates on the lines of ISO certifications, he said "compliance with the clause is a certification in itself".

Earlier, inaugurating the seminar, chief justice of Calcutta high court AK Mathur said transparency and ethics should be the guiding principles in the corporate world.

He regretted that corporate scandals had damaged the image of the institutions. "Faith of the people and observance of ethical values should be the first and foremost thing in any organisation. Unfortunately, these principles have been going down the drain." he said.

"I feel sorry to say that a couple of incidents have tarnished the image of the corporate world. So there is a need to raise our moral standards," the chief justice said at the seminar on "Corporate Governance - The Cutting Edge" organised by the Association of Corporate Advisers and Executives on Saturday.

Urging corporate lawyers to help in painting a positive picture of the Indian industry to the outside world, he said "the image should be that of an honest and fair institution which follows ethical standards. Only then can we stand up to competition in the world market".