Corp governance rating to get a boost

Raters Hope More Companies Will Opt For
Governance Ratings After Satyam Fiasco

Ashish Rukhaiyar
MUMBAI
Dec 19, 2008

CREDIT rating agencies have sensed a business opportunity, following the Satyam fiasco. Chances are they would get more clients for ‘corporate governance rating’ — a service that agencies had launched some years ago, but have so far interested only in a few companies.

ICRA launched its corporate governance rating (CGR) around five years ago, while Crisil came out with a similar product a little before that. Till date, however, only a handful of Indian companies have opted for corporate governance rating, which takes into account equitable treatment of shareholders, transparency & disclosure, composition & functioning of board, procedures laid down for making corporate decisions, among other factors.

Crisil senior director (ratings) Raman Oberoi said that while they have rated “quite a few” companies in the past, only “10 entities have made it public.” “Companies like Bharti Airtel, HDFC Bank, Infosys, Hero Honda and M&M are some of the companies that have got themselves rated and also come for annual review,” said Mr Oberoi.

While Crisil officials refused to divulge the costs involved in such ratings, Icra vicechairman & group CEO PK Choudhury said: “It is in the range of Rs 5 lakh to Rs 7.50 lakh,” depending on the “size and complexity”. Icra, incidentally, has rated 14 entities, including Andhra Bank, 3i Infotech, Infosys, Godrej Consumer Products and Punjab National Bank.

Rating agencies have tried their best to market the product by making presentations to various industry bodies and also to the regulatory authorities. “We have kept the regulators informed of what we do while organising seminars with Chambers of Commerce, etc, to create awareness for this range of services,” said Mr Choudhury.

Interestingly, even while rating agencies may advocate the importance of such ratings, there are many who feel that corporate governance is about ethics and cannot be forced by checkbox exercise. “Ethics cannot be graded and so should not be mandated by law,” said Prime Database managing director Prithvi Haldea.

“Next to every agenda item, board members should start the practice of writing its implications on the minority and majority shareholders. It would go a long way in enhancing corporate governance,” said Mr Haldea who feels that companies like Satyam would anyway get the highest rating if it opts for one.

TRIGGER POINT
* Only a few companies have opted for corporate governance so far
* While cos advocate for importance of ratings, many feel corp governance is about ethics and can’t be graded
* Rating cos try to market this product by making presentation to various industry bodies