Our Bureau
Mumbai, Jan. 22 The quarterly reporting of the financial accounts by the listed companies triggered financial re-engineering of the accounts in order to show profit quarter after quarter said former SEBI Chairman, Mr M. Damodaran.
Mr Damodaran questioned the mindless import of practices adopted by developed countries such as the quarter on quarter reporting of the accounts copied from the United States, while in the UK still the accounts were reported half yearly.
In a 90-day cycle, the CEOs and CFOs are left only with 70 days to run their companies profitably, which results in financial re-enginering, said Mr Damodaran while delivering the 42nd A D Shroff Memorial Lecture here.
“Let us not do what appeals to the analysts, most of India is not concerned about what happens on quarter on quarter basis, they are long-term investors,” said Mr Damodaran adding, “Let not the articulate minority that lives in the urban centres and the metropolis only drive the change.”
Circumstances should be created in which ordinary men and women can invest in the market with reasonable risk and expect a reasonable return, he said.
By creating exotic products you are creating the market for few people, he said.
Mr Damodaran also cited one common reporting platform for corporate as an example of simplification that would provide investors information at one place as well as would be low on cost for the companies.
It is learnt that stock exchanges were close to operationalising the common reporting platform and only the last mile hitches are now being sorted out.
It is surprising that Mr Damodaran, former SEBI Shairman, should advise doing away with quartely result, especially after seeing what Mr. Ramalingam Raju has been able to do inspite of publishing quarterly result regularly.
The CEOs and Directors are getting very fat salaries and can afford to work hard to give the share-holders the quartely results.
Certain things we copied from the West are good, one of them being the quartely results.At least the CEO's remain under pressure to perform 4 times a year. If they give out fictitious figures, they will have a greater chance of being caught.
The companies should be asked to give more data than they give out.
They should give out the various ratios of the performance of the company so that ordinary people do not have to work out the figures and can gauge the performance of the company and compare it with its peers.
I am sorry Mr. Damodaran, we want not less but more information and a reduction of salaries of the CEOs of companies which are regularly running at loss.
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