The Hindu Business Line : Crisil against mandatory corporate governance ratings

RATING agency Crisil has sought to put an end to the debate over making corporate governance ratings mandatory. It has argued strongly against any move to make CG ratings compulsory for companies.

CG ratings assigned to corporates should find use on a voluntary basis, any proposal to deviate from this simple requirement may lead to misuse of the very concept of such ratings, the country's No. 1 credit rating outfit pointed out.

Mr R. Ravimohan, Managing Director, Crisil, felt that voluntary use is significant in the current context despite what has been experienced in recent times. He was referring to the tendency, displayed by a number of companies, of not accepting the ratings. Crisil has so far rated 25 companies; of these, only seven have published their ratings.

The agency has simultaneously underlined the growing importance of CG ratings in the present scenario, marked by the need to create shareholder value and bring about better corporate governance.

"Almost all the companies that have accepted our ratings have out performed their peers on the stock exchanges," Mr Ravimohan stated, adding that good governance standards would ultimately pay insofar as shareholder value was concerned.

The Crisil chief was also quick to point out that company managements are increasingly becoming aware of the need to earn stakeholders' trust. The need is not simply reflected in a few practices that are being followed by companies.

He added that the rating agency tries to stay in touch with the companies that have not accepted the ratings so far.

`Kanoria Chem sets example'

CRISIL was particularly appreciative of the stance taken by one of its clients, Kanoria Chemicals. The latter has recently accepted the CG rating assigned to it, discounting the fact that it is not the highest possible rating.

The company, according to Mr Ravimohan, has taken a positive step, different from companies that have refused to accept what has been given to them. "In the case of certain companies, the market associates the concept of corporate governance with them straightaway. Kanoria Chemicals is probably not one of them. This is why it is an exceptional case," he said.

For a company, the measurement of its management and value creation comes by way of the success attained through its strategies, the innovations that are worked out and the treatment that is given to all shareholders, the agency feels.

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