Chennai: Corporates that do not conform to
the corporate governance code laid down in the revised
''clause 49'' of the Securities and Exchange Board of India
(SEBI) will have to pay heavily for non-compliance.
the warning note to the corporate sector, SEBI chairman
M Damodaran declared, "We are going to make non-compliance
difficult and painful. We have sought clearances to have
a provision to impose a daily fine relating to the size
of the company on non-compliance. More than that, this
record of non-compliance against a company, will also
have a dampening effect on defaulting companies'' prospects
of raising capital overseas."
the keynote address at the seminar, `Corporate governance:
Shift from compliance to delivering value, hosted by the
Madras Chamber of Commerce and Industry (MCCI), in Chennai
today he said, SEBI was also focusing on how to make compliance
to corporate governance rules more cost-efficient for
companies so that they consider it an investment rather
than expenditure; and that it would add value both in
terms of image and profitability.
corporate governance rating, he felt that it would be
an efficient tool of differentiation only when a sufficient
number of companies have complied with the minimum requirements.
the topic R Seshasayee, mananging director, Ashok Leyland
Limited, said, "corporate governance is a basic issue
of trusteeship, which attempts to guard the interest of
SEBI to help corporates move beyond compliance into a
higher plane of delivering value, N Sundararajan, company
secretary, Ashok Leyland suggested the market regulator
consider a graded approach in prescribing guidelines based
on the promoters'' holdings in a company. According to
him corporates could be classified into three categories:
where promoters'' ownership, exceeds 75 per cent
Those where promoters'' ownership, is between 50 per
cent and 75 per cent and
Those where promoters'' ownership, is below 50 per cent
companies where the promoter''s stake is below 75 per cent,
SEBI''s regulations need to be more stringent."
on the venture capitalist''s perspectives on corporate
governance, Ravi Parthasarathy, chairman, Infrastructure
Leasing & Financial Services Ltd (ILFS) said, "SMEs
lack scale to find incentive in fitting in. Because of
this, VCs find that in terms of governance, management
depth is the key issue among SME''s."
suggested that lowering the number of regulations would
make compliance far easier. He also highlighted a project
that ILFS has currently undertaken in bringing together
industry clusters - one near Coimbatore and the other
in Hyderabad. ILFS is talking to the entrepreneurs in
the clusters to bring them together into a holding company
pattern to bring scale and agglomerating clusters. This
would lead to easier governance and probably to a possible
stock exchange listing also.
also urged SEBI to instil the fear of the regulator by
not just having stringent laws but also by stricter enforcement.
the emerging rating system, Anjan Ghosh of ICRA said,
"Though there is no financial theory, which has established
a linkage between corporate governance and performance,
international opinion surveys support the proposition
that "good governance enhances value. The Mckinsey
Investor Opinion Survey 2002 has ranked board practices
are at least as important as financial performance. The
same survey also has established that investors would
be willing to pay more for the shares of a well governed
institutionalising the corporate in the management process
in corporates M S Sekhar, managing director, Three D Management
Services Pvt Ltd stated that individual flair or strong
systems alone are inadequate. "Governance is a right
vested by shareholders on the management. Exercise of
this right has to uphold and reinforce values, beliefs
and processes that build and sustain moral and professional
character of the enterprise. The institutional framework
must be embedded with the principles of empowerment, transparency,
accountability, control, integrity and compliance.