The Hindu Business Line : SEBI not a trigger-happy regulator: Damodaran

VALUES AID BUSINESS: Mr M. Damodaran, Chairman, SEBI (left), and Dr J.J. Irani, Director, Tata Sons, at a conference on Business Ethics, Corporate Governance and Corporate Social Responsibility, organised by Loyola Institute of Business Administration, in Chennai on Thursday. — Bijoy Ghosh

Chennai March 15 The Securities and Exchange Board of India (SEBI) is not a "trigger-happy" regulator and does not believe in taking action to score a debating point, its Chairman, Mr M. Damodaran, said today.

Delivering the inaugural address at a seminar on `business ethics' organised by the Loyola Institute of Business Administration (LIBA), Mr Damodaran observed that there were some who believed that SEBI was good only at barking and not biting.

He noted that it would be easy for the regulator to take action - such as suspend trading in the offending company's shares - but that would hurt the shareholders more.

"At the end of the day it's only the shareholders of the company, who with no way to exit the counter, will get punished if you suspend a company that is listed on the exchange for reasons of non-compliance," said Mr Damodaran.

"Regulation is not conducted in that manner. And we are not in the business of regulation to wake up one fine morning, get out of our office armed with Clause 49 and shoot everyone who is non-compliant. That's not our approach to regulation. We would rather persuade people to believe that good conduct, good governance, good value systems are the ones that will deliver results overtime."

This refrain is somewhat at variance from what Mr Damodaran had said just before Clause 49 was to come into force — when he had said that any violator, no matter how big, would be sternly dealt with.

When this variance was pointed out to him on the sidelines of the conference, Mr Damodaran told journalists, "I have not bitten yet, but wait and see."

Speaking at the conference, he said some believed that it was not possible to conduct business in an ethical fashion given the competitive environment. "There are those who will tell you that business and ethics cannot stand together. In the short run it might appear that companies pay a price for adhering to values while their competitors get ahead in a shorter time frame, but in the long run people would learn to distinguish, stakeholders learn to ask the right questions, and distinguish between the grain and chaff. Those that don't subscribe to values will fall by the way side; those that subscribe to values will last the course and will set benchmarks," Mr Damodaran said.

CSR, no charity

He said that corporate social responsibility did not mean handouts or charity. "It is a repayment to society for accepting those corporate houses in their midst, for allowing them to produce in their midst, and for allowing them to profit. It is a legitimate sharing of profits with society that is called in my view, corporate social responsibility," he emphasised.

"It must come from the heart, not from the accountant," he said.

Calling upon the student community, he said: "You must articulate the need for a cleaner moral environment".

IPO scam

Later, in the informal chat with journalists, Mr Damodaran said while answering a question that SEBI was on the job of reallocating the shares misallocated to benami accounts in the `IPO scam'. Asked how the redistribution would be made, he said, "we will have to find some way of doing that."

Delivering his special address, Dr J.J. Irani, Director, Tata Sons, said it was important to include it as a subject on the curriculum of business schools in the country as it is essential in the current scenario. However, he said the first thing corporates should do is to create wealth. "With empty pockets, one can only distribute hot air. First create wealth and then distribute the created wealth back to society magnified many times," Dr Irani said.

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