Regulators have to essay a facilitating role while simultaneously ensuring that rules are simple, easy to understand and help in orderly conduct by corporates, the Securities and Exchange Board of India chairman M Damodaran said on Friday.
"Regulations should have clarity so that they can be easily understood," he said at an international conference on corporate governance being held in Mumbai.
Favouring continuity in policy formulation, he said regulations were necessary for ensuring orderly conduct by corporate entities.
Pointing out that more needs to be done on the corporate governance front, the Sebi chief said role of the watchdog was to improve the investment climate in the country.
Investors must be able to access relevant information in time and form in which it is needed, he added.
He emphasised the importance of having independent directors on the company boards, adding regulations consist of three parts - diagnosis, prescription and treatment.
"The time for diagnosis is now over and prescriptive arrangements in the form of Clause 49 (dealing with appointment of independent directors) are now in place. Now is the time for treatment."
While the regulator would be happy if no penalties needed to be imposed on companies, Damodaran said good conduct should be observed right from board to lower levels. "We will make examples of a few but our effort will be to try to persuade (corporates) that there is value in good governance," he observed.
The market place and society in general would recognise companies with good corporate governance records, he said, adding: "The regulators need to facilitate this process."
According to him, regulators worldwide who might have, at times, made knee-jerk reactions to events, should understand and recognise the fact they are not the sole place where all wisdom of the market resides.
"A consultative approach is needed," Damodaran said, adding intermediates should not be considered as adversaries. If more and more people start advocating good corporate governance practices, then the concept will soon pick up momentum and become more widespread, the Sebi chief said.
There was also a need to have more case studies that show a direct relationship between good corporate governance and corporate results, he noted, adding that more documentation was needed in this respect.
