Business Organizations and Corporate Governance

Which of the following statements is/are incorrect about the statutory corporations?

a. They are wholly owned by the state. b. They are not subject to the same accounting and audit procedures applicable to the government departments. c. They are wholly financed by the government out of funds allocated by the government.

Writer's perspective seems limited to

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.

There is a reference in the passage to a phenomenon which applies to the whole world and is not unique to India alone. It is

Directions: Read the following passage and answer the question that follows.

Recently, we have seen many instances of fraud and misuse in the corporate world. Elsewhere, we see corporate governance reforms being enacted with a sense of urgency. It is time to act in India as well — we should not be waiting for problems to occur. We should avoid ‘governance by embarrassment’ and be proactive. What should be done in India? There is need to dwell on the steps that need to be taken, especially from the perspective of corporations and regulatory agencies.
The most important task, it would appear, is revitalising the institution of independent directors. The independent directors of a company should be faithful fiduciaries, protecting the long term interests of shareholders while ensuring fairness to employees, investors, customers, regulators, the government of the land and society. Unfortunately, very often, directors are chosen based on friendship and, sadly, pliability. Therefore, it is appropriate to define what we mean by ‘independent directors’. An independent director is one who will be objective in board decisions. Generally, this independence stems from stature, competence, integrity, character, upbringing, confidence in oneself, openness and, of course, from not having any material income (apart from the director’s fee) derived from the company while he/she is on the board. Today, unfortunately, in the majority of cases, independence is only true on paper. This is the case not just in India, but all over the world. In India, we have seen many instances of legal counsels being appointed to the boards of the company they advise. Such actions will not enhance the independence of the board. Rather, they will become ‘decorative and decorous baubles with no real purpose, as Professor Myles Mace calls it.   
The need of the hour is to strengthen the independence of the board. We have to put in place stringent standards for the independence of the directors. The board should adopt global standards for director -independence, and should disclose how each independent director meets these standards. It is desirable to have a comprehensive report showing the names of the company employees or fellow board members who are related to each director on the board. This report should accompany the annual report of all listed companies.
Another important step is to regularly assess the board members for performance. The assessment should focus on issues like competence, preparation, participation and contribution. Ideally, this evaluation should be performed by a third party. Underperforming directors should be allowed to leave at end of their term in a gentle manner, so that they do not lose face.