Corporate Governance for Public Sector A Corporate Governance is a a conscious, deliberate an sustained efforts on the part of corporate entity

y to strike a judicious balance between own interest and interest of various constituents on the environment on which it is operating Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Code of Conduct and Ethics for Public Sector N. Vittal suggested a code of corporate governance for Indian Public Sector Undertakings (PSUs). As chairman of the Committee on Guidelines in 1977, he had suggested to the government the code of conduct to be observed by both administrative ministries and the public sector enterprises (PSEs). Objective of the Code: The objective of the code is to prescribe standards of integrity and conduct that are to apply to all the executives and employees in the PSEs and the officers and employees of the administrative ministries concerned with them. Recommended Code for Public Sector Undertakings General Guidelines 1. The role of the executives/ officers is to assist the PSE to achieve its objectives as spelt out in the charter constituting the setting up the enterprise. 2. It is the obligation of every executive/ officer and employee of the PSE/ administrative ministry to uphold the rule of law and respect human rights solely in the public interest while making recommendations and exercising administrative authority. He or she must maintain the highest standards of probity and integrity.
3. In relation to the general public, the executives/ officers and employees in the PSE/

administrative ministries should conduct themselves in such a manner that the public feels that the decision taken on the recommendations made by them are objective and transparent, and are not calculated t promote improper gains for the political party in power or for themselves or for anyone else. This will also apply mutatis mutandis to the officers and the employees in the administrative industry concerned with PSE

4. Executives, officers and employees of the PSEs/ administrative ministries should not seek

to frustrate or undermine the policies, decisions and actions taken in public interest by management. Where following the instructions of the superior authority would appear to conflict with the exercise of impartial professional judgment or affect the efficient working of the enterprise, he/she should set out points of disagreement clearly once in writing to the superior authority or seek explicit written instructions. This will also apply mutatis mutandis to the officers and the employees in the administrative industry concerned with PSE.
5. Where an employee of PSE has reasonable grounds to believe that he or she is being

required by the superior authority to act in a manner which is illegal or against the prescribed rules and regulations, or if any legal infringement comes to his or her notice, he or she should decline to implement the instruction, and would also have a right to bring the facts to the notice of the chairman/ managing director of the enterprise or the secretary of the administrative ministry concerned. This will also apply mutatis mutandis to the officers and the employees in the administrative industry concerned with PSE 6. The religion, region, caste, language of the executive will have will have no influence on the working in his official capacity.

Concern for Value of public asset and Funds The employees in PSEs/ administrative ministries should avoid wastage and extravagance and ensure effective and efficient use of public money within their control. In cases of disputes or grievances, efforts must be made to resolve them quickly.

Accountability and responsiveness to public

1. Consistent with accountability with superior officers and ministries in accordance

with provisions governing PSEs , administrative ministries, the employees in the PSE should also practice accountability to the people in terms of quality of service, timeliness, courtesy, people orientation and readiness to encourage participation of, and form partnership with citizen groups for responsive management.

2. Employees in PSEs should be consistent, equitable and honest in their treatment

of the members of the public, with particular care for the weaker sections of society, and should not even be or appear to be unfair or discriminatory.
3. Employees in PSEs should accept the obligation to recognize and enforce

customers right for speedy redressal of grievances and commit themselves to provide services of declared quality and standard to customers
4. Employees in PSEs should respect the right to information of the public on all

activities and transactions of organizations, except where they are debarred in the public interest from releasing information by provisions of law or by valid instructions.

Differences in governance between the public and private sectors

Governance Organisation structure

Private Sector Enterprise: Outsider/insider models

Public Sector Department Statutory Authority State owned enterprise Private/public partnerships Commonwealth Corporations Act State Owned Enterprises Act 1992 Statutory legislation Regulator and regulated For Public Public good Auditors General Public Service Commissioner Government Minister/s Department Board Responsibility diffused Ministerial

Regulation

Corporations Act

Agents Objectives Origin of Governance model Authority

Regulated For Shareholders Profit ASX Standards Australia Board

Responsibility Independence

Legal Responsibility of board Legal Independence of

board Selection and appointment

control Of

Accountability Reporting

members To shareholders

Diffuse

Annual Report to shareholders Ministers Parliament Auditor general Agency Heads Treasury and Finance

The similarities are: in the private sector, managers acting as the agents for shareholders oversee the day-to-day management of the listed company. In parallel, in the public sector, the officials of the public sector (the public servants) acting as the agent of tax payers manage the public organization for the purpose of serving the best interest of the general public (although it is often debatable on what is really the best interest for the general public). In terms of managing the interests of various stakeholders, in the case of the private sector, now, there is an increasing consensus among controllers of publicly listed companies that the company should not only serve the best interest of the shareholders, it should also consider the interest of other stakeholders of the company such as the interest of employees, customers, suppliers as well as the interest of the local community where the corporation is operating. In the case of the public sector, various levels of governments will have different stakeholders but the ultimate aim is to serve the public interest and provide services to the community on behalf of the government and at the same time to provide adequate solutions when market failure is likely to happen. Differences between the public sector and the private sector governance are also obvious: they serve different interest groups and the public sector is subject to much greater scrutiny. The independence is a major difference. All public sector entities are subject to Ministerial control and auditing by an Auditor-General; they must meet performance targets and they are constrained by political reality. In addition, usually the appointment and removal of chair and CEO is at the discretion of the Minister. Another related difference is that should an enterprise

fail, it goes out of business and the owners lose their investment. Government enterprises are more likely to be rescued and losses absorbed even if the enterprise is closed down.