Professional services firm Deloitte has begun a centre for corporate governance. Headed by senior director Abhay Gupte, the centre, among other things, will provide training and education to top management on matters pertaining to corporate governance. The centre will also develop tools and processes based on emerging best practices and marketplace observations. It has already begun work with a few corporate houses. In an interview with FE?s Viveat Susan Pinto, Gupte highlights the challenges involved in bringing about a change in mindset pertaining to corporate governance. Excerpts:

How serious are corporates when it comes to effective governance?

There are some companies who prefer to put a tick in the box when asked whether they are complying with governance issues. There are few others who seem to be following governance issues in letter and spirit. If you were to ask me to divide the corporate ecosystem here then I would distribute it into three parts: the public sector undertakings, the Indian arms of multinational companies, and family-run enterprises or promoter-driven companies from small to large-cap. On a scale of one to ten, I would rate the family-run enterprises at four when it comes to complying with governance issues. The multinationals would be at about six to seven and the PSUs are in between at about five.

Given the wide-spread perception of PSUs being laggards when it comes to complying with rules and regulations, isn?t it not surprising that they rank better than family-run enterprises when it comes to adhering to corporate governance standards?

Yes, it is. But one should keep in in mind that they are required to do so by law. All listed companies, whether in the public or private sector, have to adhere to governance strictures. Since PSUs are managed by the government the onus is on them in a sense to adhere to the law and thereby set an example. They are doing just that.

Can corporate governance be practiced fairly in family-run enterprises?

The question is about what you think is right. Corporate governance affects every individual in an organisation. It is not something restricted to the top management alone though the latter are key drivers of it. It is a norm that an organisation has to be transparent and fair with its people, investors, allied stakeholders etc. In my view every organisation needs to look into this matter seriously. Some organisations are indeed serious about it, which is why they take up issues pertaining to corporate governance in earnest. Some are slow. The law can provide the framework, but the awakening has to come from within that this is just not a quarter-on-quarter or year-on -year rigmarole to be followed.

How far is Clause 49 of the listing agreement of stock exchanges equipped to deal with corporate governance. Is there need for amendment?

There are two glaring issues with Clause 49. One, it does not have the rigour of the Sarbanes-Oxley Act in the US. The latter was enacted in 2002 as a reaction to accounting and corporate scandals in companies such as Enron, WorldCom etc. It is quite a rigorous piece of legislation. Clause 49 pales in front of it. The intent of the clause is good, but it is left to individual interpretation. That brings about a degree of arbitrariness to the exercise. This can be dangerous. The second issue concerns enforcement. The clause does not have the necessary statutory provisions to bring about strict enforcement. That is a major drawback in my view. What is the point if a piece of legislation does not have the teeth to enforce? Erring firms can never be brought to task then. In time, I think these issues would have to be addressed. It is only then that corporate governance standards will move to the next level.