The Securities and Exchange Board of India (SEBI) has heeded to the plea of listed companies to send but a skeletal annual report to their members.

It has directed stock exchanges to amend Clause 32 of the Listing Agreement accordingly. More than two decades ago, Section 219 of the Companies Act, 1956 was amended to the same effect.

SEBI, which came onto the scene much later (1992, to be precise), however, did not offer this escape route to listed companies.

Obviously, it must have thought that the norms on disclosure for companies in which public are substantially interested read, listed companies vis--vis the norms for others ought to be more demanding. In the event, the sudden volte-face in its thinking is a tad perplexing.

Escape Routes

Three extenuating factors have been pleaded for affording this escape route First, those members who make a written request for a complete report would in any case be supplied one, which is what section 219 also mandates. Second, the full report in any case is available if only members want. And, third, why inflict avoidable costs on companies which printing voluminous reports means.

A listed company that mobilises funds from the public should not fight shy of baring all to its members.

Having furnished the requisite information the next thing is to disseminate it to them. Why should a member be expected to go to the Registrar's office or go to the web site of the company?

Not all members are computer-savvy or have access to the Internet. The cost argument is laughable to say the least. Companies, which splurge on advertising, travelling and other expenses, cannot be heard to say that full-fledged annual reports cost them a fortune and burns a hole in their pockets. Cost-cutting obviously needs to be done elsewhere.

The abridged report together with complete audit report may whet the curiosity of the reader without sating it. The auditor might have gone hammer and tongs at an accounting policy for which answer might lie in the full-fledged report.

Now it is unfair to expect a discerning reader to ask for the full report to sate his curiosity before he attends the annual general meeting especially when there is no guarantee that the full report would arrive on time so as to give him a clear 21-day access to it before the meeting.

Unwise stance?

The listed companies' plea for parity of treatment in this regard with unlisted ones smacks of a pennywise pound-foolish stance.

It is perfectly all right for the law to exempt unlisted companies as in vast majority of cases such companies have membership comprised largely from a charmed circle of friends and relatives on first name terms with their promoters.

But not so for a listed company whose members are strewn, as it were, all over the place sometimes even abroad.

Having sought their money, the least such a company can do to them is to provide an easy and untrammeled access to its annual report.

S. Murlidharan
(The author is a Delhi-based chartered accountant.)