The principal’s son was in our class. For long, he was just another green uniform for us. But as we started losing our innocence, we noticed that some teachers addressed him in plural, a sign of respect. Glances were exchanged when he was not asked for homework. We whispered about how he got to run home during the short interval, a taboo for others. In hindsight, this was my first real brush with conflict of interest and the insider advantage. But over time, we learnt to live with it and occasionally even benefit from it.
If the stock market was a school, companies would be students, the exchanges would be teachers and the government the principal.
This principal, who has 70-odd sons, is well meaning. He has put them in the school because he wants them to learn discipline and be competitive. The title of a disinvestment seminar held in November, ‘Listing as a tool for improved corporate governance’ screamed of this noble intention. At the seminar, the disinvestment secretary said, “We have the Securities and Exchange Board of India (Sebi); we have stock exchanges to demand compliance to their norms and guidelines...Behind the scene a large number of professionals, investors get busy researching the company. Thus, listing introduces multiple layers of oversight mechanism.”
But, sadly, not one of these layers seems to be working. How will the sons learn discipline if the teachers don’t reprimand them for mischief and transgression?
Last week, Coal India (CIL) got away with what I feel was no minor mischief. On Thursday, a Press Trust of India report said state-run CIL has proposed to pay a dividend of Rs 5,684.73 crore to the government, quoting an official document. Listing rules say any price-sensitive information should be disclosed first on the exchange. Here, the company has to announce the date of meeting of directors who will consider and declare dividend. But, even before such announcement, some people know the precise amount of dividend to be paid. Clearly, the company did not take enough care of a highly price-sensitive material information. That raises another serious question. What is the board there for, if somebody has already decided the dividend?
Neither exchange seems to have bothered to ask the company why this information was not given first to the company’s investors first. Disturbingly, this is not an isolated incident. A cursory look at the announcements by some of the principal’s big sons shows that these companies have never clarified on any news item in the past year, though many plans were reported by the media.
Are these companies exempted from disclosure norms? Or, are the exchanges too scared to question them? Who monitors actions of officials and ministers handling price-sensitive information? Can we expect the vice-principal (VP) Sebi to step in, when not busy tweaking school rules to suit the principal? Or, should we be content that at least the VP doesn’t have sons to send to school?