New Delhi, Sept. 24: Corporate India would love to hear this: corporate governance expert Madhav Mehra believes that the current practice of issuing quarterly accounting reports should be scrapped.
Mehra, who is the president of the UK-based World Council of Corporate Governance, has his own reasons for suggesting the scrapping of a mandatory requirement that companies usually groan to comply with.
He reckons that the stipulation actually creates greater opportunities for resorting to an accounting sleight of hand — and flies in the face of Sebi’s rationale for insisting on quarterly reporting from 1992.
“Quarterly results are based on too much of a short-term analysis. No greater harm can be done to an economy than by judging company performance on the basis of three-monthly results,” Mehra told The Telegraph. The fudge is designed to please shareholders.
Not everybody agrees though. When asked to comment on the issue, a senior chartered accountant said: “Internationally, quarterly results are an accepted norm. It enables all the stakeholders — shareholders, creditors, lenders — to know on a regular basis the company performance and its profitability. It helps them make investment decisions,” he said.
At the end of the year, the company may show a profit, but it could have run into losses in the first quarter, in which case the shareholder loses out, said the chartered accountant.
Mehra — who pulls no punches when he spouts his radical views — says the West isn’t really a model for corporate ethics and has been shown up by the recent spate of corporate scams that have roiled the US. Mehra was in town to attend a curtain raiser to the third international conference on corporate governance to be held from September 26-28, which is organised by Ficci in association with WCFCG.
Industry is also keen to set up an institute for corporate governance in partnership with the government for the training of directors in matters of corporate governance, said Ficci president R.S. Lodha. Lodha said the Naresh Chandra Committee, which is looking into the gamut of auditor-company relations, regulatory bodies and independent directors, is expected to submit its report by mid-October.