Sebi Directive Labeled 'Laughable' by Former Chairman Damodaran

Former Sebi chairman M Damodaran criticizes Sebi's directive on minimum information for related party transactions as inconsistent and overly complex. He stresses the importance of internal governance and independent directors, pointing out state-run companies' lack of women directors and advocating for better governance practices.

In a scathing commentary, former Sebi chairman M Damodaran has termed the recent directive on minimum information by the capital markets regulator as 'laughable'. Speaking at an event organized by the Institute of Internal Auditors, Damodaran highlighted the inconsistencies within the directive, emphasizing its overly prescriptive nature while calling for governance practices to originate from within companies.

Damodaran quipped about the extensive length of the February 14 directive, designated for information review by audit committees and shareholder approval in related party transactions, advocating instead for a more pragmatic approach. He noted that failure to adhere to prescription guidelines can often lead organizations astray, translating compliance into a mere expenditure rather than an investment in long-term sustainability.

Underscoring the significance of independent directors, Damodaran recalled the infamous Satyam scandal, where independent directors affirmed detrimental decisions. He stressed on the essence of independent governance, criticising state-run companies for lacking female directors and encouraging the separation of internal audit functions from financial reporting to promote transparency.

(With inputs from agencies.)