Take corporate governance beyond boardroom: Sebi chief

Securities and Exchange Board of India (Sebi) Chairman M Damodaran today urged companies to relook at reporting quarterly profits as this restricted CEOs to short-term gains rather than long-term objectives.

"It is necessary to look at whether an overly prescriptive regime dampens CEO creativity and if the British system of reporting profits every six months, now in force, compared with the American system of reporting every three months, has made CEOs more short-term than long-term in their outlook," Damodaran said.

The Sebi chief was addressing a CII summit on corporate governance.

He emphasised that the debate on corporate governance should go beyond looking at whether it added value to the company.

"When we talk about corporate governance, we are talking more in terms of creating an organisation that discloses much more than the past, about organisations knowing who they are dealing with and not merely about who the independent directors are. Let companies see that governance goes beyond the boardroom and informs all processes and levels within an organisation," Damodaran said.

Damodaran was referring to the rule for listed companies which prescribes that the board shall meet at least four times in a year, with a maximum gap of three months between two meetings.

The Sebi chief cautioned industry against retaining people who simply grace company boards vis-a-vis those who make effective contributions to the company.

Damodaran has in recent times spoken of the need to appoint independent directors on the boards of public sector companies. He has also lashed out at those entities that sit on boards without owning a single share of the company.

"It is necessary to address the issue of government nominees on boards and whether they represent the government alone or the company, in totality, forgetting the source from where they come," Damodaran said during his address.