If America estimates the cost of compliance with the tough Sarbanes Oxley Act’s reporting requirements for listed companies at around $ 5 billion, then Corporate India is also starting to tot up their cost of corporate governance requirements. At a recent Mahendra-Young lecture on corporate governance, Tata Director R.Gopalkrishnan estimated compliance cost for Indian companies at Rs 300 crore. He estimates the size of the audit market at around Rs 700 crore (excluding tax audit).
The figure has doubled in the last three to four years due to increased reporting requirements, he says. American companies planning to raise public money now weigh the cost of compliance and involvement of management time before planning a public offer.
In India too, lower interest rates and higher disclosure requirements for listed companies have already made it unattractive to remain publicly listed, especially for foreign-owned companies. Is this a healthy trend?
Changing times
The accounting world is whispering about a change in auditors at Ashok Leyland Ltd. The grapevine says Price WaterHouse (PWC)— its present auditor— wants to opt out of the assignment and Ernst & Young (E&Y) has been sounded to take over. Sources say Remi Hinduja, who qualified as a Chartered Accountant at Arthur Andersen, (which merged with E&Y in India) is behind the move to bring in E&Y sometime in the near future. The E&Y spokesperson said the firm S.R.Batliboi would have handled the actual audit if the account were to move, but this is ‘‘not currently contemplated.’’ It is not clear why Price WaterHouse want to relinquish the Ashok Leyland account. We tried seeking a confirmation from the Price WaterHouse partner in Chennai but received no response. The situation should be clearer in the coming weeks. On the other hand, nobody still knows why S.R.Batliboi resigned mid-term as auditor of Moser Baer.
Turning investor friendly
The Securities and Exchange Board of India (Sebi) is, at long last, taking steps to update its website to make it more accessible to investors, companies and researchers. Sebi has started the process of setting up a committee to catalogue the problems and find solutions to make its website user friendly. However, many of the problems are obvious and have already been brought to Sebi’s attention several times. For instance, its search engine rarely works. A couple of weeks ago, a search for any information on the ‘‘SMILE’’ taskforce yielded zero results. Similarly, since press releases are not properly titled and tagged and are merely dumped under broad heads, they are extremely difficult to search. Trying to locate a release on a broker penalised by the regulator would require one to wade through every posting under the sub-head ‘Secondary Market’, because of bad tagging. A Sebi order in a takeover case may also require similar labour, because the company is not mentioned in the title. Sebi needs is a common sense approach rather than a committee. Some expert advice from websites handling large daily traffic and maybe a Google search engine should lead to a vast improvement. Restructuring the Electronic Data Filing and Retrieval (EDIFAR) is, however, a bigger problem.
SAT travails
While on accessibility of regulatory systems, the finance and law ministries need to pay some attention to the Securities Appellate Tribunal (SAT), which hears appeals against orders of the Sebi chairman and full time members. Those who follow regulatory developments know that it required a big struggle to have SAT expanded into a three-member body and to elevate its stature.
For a long interregnum until its reconstitution, SAT had functioned under a single presiding officer. But instead of improving, things are drifting badly under the new dispensation. Presiding officers know little about the capital market and often cannot seem to distinguish between the class-action nature of investor complaints and one-to-one civil disputes.
Consequently, they often ask parties in dispute to ‘settle’ issues among themselves. Hearings are also frequently adjourned. While this may not be a serious hardship to companies, it is an enormous inconvenience to retail investors. Fortunately, Finance Minister P.Chidambaram has appeared before SAT in his avatar as a top corporate lawyer and should readily understand the problem.
Privacy protection
America continues to lead the way when it comes to protecting the individual’s right to privacy from the technology-enabled hard sell by the corporate world. After introducing the No-Call directory to protect those who list their names on it from being disturbed by telemarketing calls, the US house sub-committee has cleared the Spy Act last week, which deserves quick emulation. An acronym for Securely Protect Yourself Against Cyber Trespass Act, it will allow a fine of up to $3 million to be slapped against those who illicitly collect personal data from Internet users, divert browsers, hijack default pages or spam through pop-up advertisements.
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