India’s Nasscom Focuses on Ethics and Corporate Governance

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Indian outsourcing companies should establish whistleblower policies and create ombudsman positions, according to two of many recommendations in a report from a governance and ethics committee set up by India's National Association of Software and Service Companies.

The report, released Tuesday, lists voluntary recommendations that aim to establish high standards of probity and corporate governance within the Indian IT services and business process outsourcing (BPO) industries, Nasscom said.

The report comes about a year after B. Ramalinga Raju, founder of Satyam Computer Services and then chairman of the large Indian outsourcer, admitted that the company's revenue and profits had been inflated for several years. A big concern at the time was that the crisis at Satyam could affect the confidence of foreign customers in other Indian outsourcers as well.

Against this background, the role of company boards in relation to their management is a focus issue in the report. A critical element of an effective board is independence from management, according to the report.

It has, for example, recommended that the chairman of a company be a non-executive independent director. A number of Indian outsourcers have company promoters as chairmen, with or without executive powers.

Independent directors should also meet as a group without the presence of the management, to determine any important matters that deserve immediate and complete attention of the full board, or to consider any performance concerns about the company and its management that require further discussion at the board level, the report said.

The company's audit committee must have a minimum of three members, who are all independent non-executive directors, according to the report.

The report also recommends that companies adopt a code of conduct with customers, including in the areas of data security and protection of intellectual property. Among other measures, companies will have to provide a reasonable 'cooling-off-period' in moving employees between projects undertaken for competing clients, if employees have access to sensitive data or processes, the report said.

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