Saturday, January 22 2005 20:03 Hrs (IST) - World Time -

New Delhi: Finance Minister P Chidambaram today (Jan 22, 2005) pulled up India Inc for flouting corporate governance norms, saying many companies have yet to appoint independent directors and audit committees.

"I am dismayed at the tardy response of Indian companies to corporate governance requirements," Chidambaram said at a CEOs' conference in New Delhi.

"If I ask CEOs what is the distance they have travelled in the corporate governance milestone of 1-10, not many of them will reply that they have crossed even 3," he said.

He pointed out that not many private and public sector companies have independent directors on their boards, audit committees, nomination committee and remuneration committee.

Chidambaram also expressed concern at the reports of resistance in the corporate world to the idea of having 50 per cent of independent directors on a company's board.

Pointing out that the definition of stakeholders has gone beyond the traditional boundaries of land and capital, he said every CEO must be conscious of all stakeholders, including consumers and those engaged in the supply chain.

He asked Indian companies to take globalisation seriously as technology has enabled everyone to be familiar with latest business models in any part of the world.

The Finance Minister asked the corporate world to also take the country seriously. "While the world is taking us seriously. It is high time, we Indians should take ourselves seriously."

Chidambaram said whereas overseas companies have started focusing on India, Indian corporate world is still largely confined to metros.

"While many overseas companies are shifting their manufacturing base and technological processes to India, how many Indian CEOs are shifting their offices outside metros," he wondered.

Pointing out that remuneration of CEOs must be commensurate with their performance, the Finance Minister said during the last two years consumers have punished those who were drawing extraordinary salaries.

He said he was not averse to the idea of two kinds of pay structure for CEOs in the public sector units, basic and the one linked to their performance.

"But then, you cannot ask for tribunals and be ready for punishment on the lines of CEOs of private companies," he said.

Referring to celebrated economist Paul Schumpeter's "ideas of creative destruction", Chidambaram said success is a short-term phenomenon and knowledge and skills have shelf life.

The successful are the ones who manage in this shelf life to adjust knowledge and skills to the market needs.

Of various traits that CEOs suggested, Chidambaram said the most important one is to have an idea when to pack up and make room for others.