The Hindu : Tamil Nadu News : SEBI prefers persuasion to drastic action

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Friday, Mar 16, 2007
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SEBI prefers persuasion to drastic action

Special Correspondent

De-listing of companies will hit shareholders, says Damodaran

— Photo: S.R. Raghunathan

LENDING AN EAR: SEBI chairman M. Damodaran (left) listens as Tata Sons Director J.J. Irani makes a point, at a conference in Chennai on Thursday.

CHENNAI: The Securities and Exchange Board of India prefers persuasion to drastic action to make companies comply with corporate governance norms in their long-term interest.

"We are not trigger-happy regulators ... would rather persuade people to believe that good conduct, good governance and good value systems will deliver results over time," SEBI chairman M. Damodaran said here on Thursday. He was addressing the inaugural session of a two-day international conference on `Business ethics, corporate governance and corporate social responsibility' organised by the Loyola Institute of Business Administration (LIBA).

Pointing out that SEBI was often criticised for being lax, he said it was not difficult for it to take action. But action, especially de-listing of companies and suspending transaction of their shares, would affect shareholders. Detailing corporate governance norms in several countries, including Clause 49 of the listing agreement (on appointment of independent directors) prescribed by SEBI, Mr. Damodaran said companies subscribing to values would "last the course and set bench marks." It might appear that companies adhering to values paid a price and their competitors got ahead in the short term. But, in the long run, "people learn to distinguish ... even the competitive environment learns to distinguish between the grain and the chaff."

Noting that the conference was one of its kind dealing with all three issues of business ethics, corporate governance and corporate social responsibility, Mr. Damodaran underlined the role of the youth in articulating the need for a cleaner moral environment and inclusive growth.

Social responsibility

As for CSR, he said it was not about handouts and charity; it was a way by which the company repaid society for allowing it to produce and profit. "And it must come from the heart, not from the accountants."

In his address, Tata Sons Director J.J. Irani said CSR was gaining ground and pointed out that sticking to the ethics was neither old fashioned nor a disadvantage.

India was far ahead of the rest of the world in corporate social responsibility initiatives. In the times to come, the stakeholders would prefer corporates paying attention to good corporate social responsibility, he said.

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