India's Nasscom Focuses on Corporate Governance

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Following the financial scandal at outsourcer Satyam Computer Services, India's National Association of Software and Service Companies (Nasscom) will focus on good corporate governance and ethics among its member companies.

The trade body announced on Wednesday a Corporate Governance and Ethics Committee that will work with authorities, policy makers and regulators in the areas of corporate governance and transparency.

In the wake of the Satyam scandal, customers of Indian outsourcers will scrutinize their suppliers very closely, a number of analysts said last month.

Satyam's founder B. Ramalinga Raju said in early January that the company had overstated profits for several years. Investigators believe that the profits existed, but Raju may have siphoned off funds from the company.

The new Nasscom committee will not have any direct authority over member companies, and will play an advisory role, laying down best practices for the Indian outsourcing industry, said a person close to the situation who declined to be named. It will for example work on making the whistle-blower policy in most outsourcing companies more effective.

The problem with self regulation is that it can only help up to a point, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International. "What we need is tough regulations and stiffer penalties for transgressors, which will have to come from the government," he added.

The Indian government and other agencies have said that the rules would be tightened to ensure that financial misdeeds such as those at Satyam do not reoccur.

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