Early warning system to prevent Satyam re-run | business | Hindustan Times
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Early warning system to prevent Satyam re-run

business Updated: Jun 03, 2009 01:07 IST
Mahua Venkatesh

Stung by the accounting manipulations in Satyam Computer Services Ltd, a concerned government is now hammering a stringent set of rules and norms that would arm even small investors to detect irregularities in firms through an early warning system.

This system, which is currently being devised by the Corporate Affairs ministry, would be in addition to quarterly earnings reports, company surveys and analyst reports that investors can currently use to assess the health of firms where they have invested money.

“We have already flagged that an early warning system to detect irregularities in companies will be our priority,” Corporate Affairs Minister Salman Khursheed, 56, told HT in an interview.

Under current norms, a person who holds shares worth Rs 1 lakh or less in a company is categorised as a small investor. However, while large investors can question corporate strategies through voting rights and other means, small investors do not have any specific instrument to hold promoters of companies accountable .

Khursheed refused to divulge details of specific tools that would be given to small investors but stressed that, “Corporate governance norms will be strengthened and demystified for the aam admi.”

The government will shortly introduce a new Companies Bill in Parliament. The previous one, which was introduced in October 2008, lapsed after the Lok Sabha was dissolved.

The new Bill would contain specific clauses allowing “articulation of shareholders democracy with protection of the rights of minority stakeholders and responsible self-regulation with disclosures and accountability,” said an official, who did not wish to be identified.

Khursheed said accountability and transparency norms would further strengthened to prevent Satyam-like scams.

There has since been spate of resignations of independent directors — 265 independent directors have resigned from the boards of 211 companies between January and May.

“Accountability is key,” Khursheed said. “The role of independent directors would be crucial.” Interview in HT Business.