The Indian stock market is showing an increasing tendency for a zero tolerance for any perceived dishonesty on the part of companies, expecting them to remain fully transparent and compliant in corporate governance and has severely punished the companies faltering on transparency, the ASSOCHAM said, cautioning promoters to remain committed to enhancing shareholders’ value.
“Gone are the days when a firm or its promoters could get away with practices which do not follow the best of standards. Thanks to increasing awareness among the investors and strict disclosure norms, one cannot afford any wrong doing, knowing or unknowingly,” the chamber said, in the backdrop of a few recent examples where share prices of a few companies saw wild fluctuations and erosion in wealth on suspicions of unfair transactions.
The ASSOCHAM said pre-dominance of the foreign portfolio investors, large number of domestic mutual funds with enough clout in the market, have also led to a situation where the punishment for any act , which even appears to be wrong, can be severe in terms of wealth erosion.
“So, the companies listed in the stock market have to be extra careful in ensuring that the corporate governance standards are in line with the best international practices. In fact, the stock investor is willing to give a handsome premium on the quality of promoters, boards and the CEOs. Since majority of the shareholding is held by the promoters, it is in their interest that their firms are run in the most transparent manner. Extra care should be taken with regard to correct and transparent valuations for all the inter-group transactions. Nowadays, the analysts are all having eagle eyes”, said the Chamber Secretary Mr D S Rawat.
Besides, credit must also be given to the regulator, SEBI, for ensuring that the companies are made to provide all material disclosures which have a bearing on the stock prices. Things like change in the top management , any allegations of wrong doing, must be responded to in the filings to the stock exchanges so that investors remain fully cognisant of the developments in the companies , they have stake in, the ASSOCHAM said.
It said, a lot has been done in the area of corporate governance while “still lot more is needed. Image of corporate India and the promoters is of paramount importance for gaining the confidence of not only the investors, but also the society at large.