The Hindu Business Line : Quarterly results: Adding to corporate burden?

YET another corporate governance issue could soon come to boil. After having seen the back of mandatory listing in the regional bourses, listed companies seem to have set their eyes on the regulatory norm that requires them to make quarterly disclosure of financial results.

Some of the captains of Indian industry are making a case for doing away with the quarterly disclosure requirement, claiming that such norms only tend to multiply the compliance burden for listed companies.

A case in point is the observation made by the HDFC Chairman, Mr Deepak S. Parekh, at a panel discussion on corporate governance organised by the Institute of Company Secretaries of India (ICSI) here on Monday. He said, "There is no need for quarterly reporting of financial results. It would be enough if corporates were asked to disclose their financial performance every six months. We must not ape what is happening in the US," Mr Parekh said.

To support his viewpoint, Mr Parekh cited the developments taking place in the field of corporate governance in the UK. He revealed that a committee appointed by the British Government is thinking in terms of recommending a move away from quarterly reporting.

He also held that such norms would only strengthen the hands of auditors, who are demanding more fees for attesting compliance. "Audit fees is only skyrocketing because of such regulatory requirements," Mr Parekh said.

Agreeing with the views of Mr Parekh, Mr Harsh V. Lodha, Chairman, FICCI Corporate Laws and Governance Committee, told Business Line, "The whole system has become sensitive to quarterly performance and at times it forces companies to lose long-term perspective".

However, there were also contrary views expressed in regard to Mr Parekh's remarks, with some of the corporate executives feeling that quarterly reporting of financials should not be done away with.

"In the Indian context, the quarterly disclosure should stay. Even otherwise, minority shareholders do not enjoy the same level of information as compared to promoters and large shareholders. There are also other stakeholders who are keen on tracking corporate performance," a chamber official said.

However, another chamber official felt that care has to be taken to ensure that rules/regulations are not made in such a fashion that disclosures become irrelevant and only end up in providing information to competitors without value addition to shareholders.

"We shouldn't burden companies with compliance costs. This may result in our losing the competitive edge," the official said, while noting that shareholders should determine the quantum and periodicity of information that should be disclosed.

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