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KOLKATA, July 8

THE Securities and Exchange Board of India (SEBI) has invited response from leading credit rating agencies on whether the latter can institute a way to measure what its Chairman, Mr G.N. Bajpai, calls is "substance'' of corporate governance.

Such substance, according to the SEBI chief, pertains to creation, management and distribution of wealth among stakeholders. Two rating agencies, Crisil and ICRA, are currently involved in the exercise.

SEBI would like corporate governance ratings to become widely accepted in the market. Companies, it is felt, would seek these ratings as these will help them gain credibility with investors. The regulator, however, is firm in its opinion that corporate governance ratings will not be linked to credit ratings in any way.

A top-rated company, therefore, will not necessarily score well in terms of corporate governance. ICRA, it may be mentioned here, had recently awarded its first corporate governance rating to ITC Ltd.

As for corporate governance, SEBI has urged company managements to assume a proactive role. "Good governance should not be a priority with the top management alone... it should percolate down to the middle management and the grass roots'', Mr Bajpai said.

The regulator has also underlined the need for corporates to follow all accounting standards in both letter and spirit. A company need not stick to a mere rule-based approach when it comes to implementing these standards. A lot of good work has to be done on a voluntary basis, SEBI has maintained.

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