Lack of corporate governance is a long-term health hazard for the corporate world and adoption of ethical standards along with governance could reflect in the bottomlines of companies, according to the Securities and Exchange Board of India.
"Failure to comply with corporate governance is a long term health hazard," Sebi wholetime director A K Batra said at a seminar 'Corporate governance rating model', organised jointly by the market regulator and Federation of Indian Chambers of Commerce and Industry in New Delhi on Saturday.
The Sebi official said the substance of corporate governance was provided by commitment to ethics. However, he added that incorporating corporate governance was a huge task and would take time.
"Ethical output cannot be measured directly, but it is possible indirectly through value addition. In the long run, it will get reflected in the bottomlines of companies," he said.
He said one had to differentiate between what was illegal and what was unethical and cited that in the case of Andersen, though the experts feel that the accounting firm had nothing illegal, it was "certainly unethical."
Batra said the corporate governance rating would help the corporates and shareholders alike, but did not specify whether it should be made mandatory or not.
Stressing that Sebi had mandated independent directors and the role of board of directors, Batra said an in depth scrutiny was "eschewed" at times of good performance.