The Hindu : Business : SEBI norms on `quiet period' soon

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Saturday, Jul 22, 2006

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Business

SEBI norms on `quiet period' soon

Staff Reporter

Guidelines to be applicable to companies planning public issue

— Photo: V. Ganesan

IN INVESTOR INTEREST: M. Damodaran (centre), Chairman, Securities and Exchange Board of India, having a lighter moment with P. Murari (right), Adviser to President, FICCI, and M. Rafeeque Ahmed, Chairman, FICCI, TNSC, in Chennai on Friday.

CHENNAI: The Securities and Exchange Board of India will unveil guidelines shortly to govern media campaign of companies that plan to go public, its Chairman M. Damodaran said here on Friday on the sidelines of a conference on corporate governance organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).

The proposed `quiet period' regulation is essentially intended to act as a restraint on companies creating a hype ahead of their public issue.

Declining to go into the specifics, he said companies at present were resorting to such a practice.

Addressing the FICCI meeting on `market oriented reforms and corporate governance imperatives towards a global economy — a perspective,' Mr. Damodaran emphasised the need to create awareness about the essence of corporate governance.

"Corporate governance is not about arithmetic,'' he said referring to the debate following SEBI's direction on appointment of independent directors, better known as Clause 49 of the listing agreement. The direction, with which companies had to comply by December 31 last year, was not about numbers, but quality of people on the board.

"One effective independent director on board is more than 50 per cent composition [on board] that come and stay,'' he declared. Denying a "disconnect'' between what SEBI did and the Ministry of Company Affairs proposed on the issue, he said the focus up to early next year would be on "content of the boards.''

Noting that there were several queries, including the independence that such directors brought, he said government directors did not count as independent directors. Expressing confidence that shareholders would question companies not complying with the direction, he said SEBI's role was to "ensure that those who run the companies are asked the right questions.''

On academics' stand that corporate governance did not result in better operating performance, Mr. Damodaran said: "Practising good values is not going to destroy companies.'' He was against a rating system for companies adhering to corporate governance norms. "Till a sufficiently large number of companies practise corporate governance, let's not get into this.''

Explaining the theme of the conference, Forward Markets Commission Chairman S. Sundareshan said corporate governance called for "commitment ... innate integrity and talent."

FICCI Tamil Nadu Council Chairman M. Rafeeque Ahmed said corporate governance had succeeded in attracting a good deal of public interest because of its apparent importance for economic health of corporations and the society.

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