Wednesday, February 18, 2009

Corporate India:Handbook on qualitative factors(CS)

■ It is clear after the Satyam incident that investors should focus on corporate governance issues, particularly because of losses incurred in the past 12 months that have failed to rise to the fore. As a result, we believe qualitative factors on management competence, honesty, a focus on core competency and internal processes will be as important as reported earnings and valuations in the next few quarters.
■ We provide one-page details on companies under our coverage to look at the softer, qualitative aspects of their make-up. While we have worked on a questionnaire-based framework, our objective has been to focus more on the spirit of the exercise rather than the letter
■ Our framework analyses corporate governance on: 1) structural risks, 2) accounting risks, 3) transactional risks and 4) events/issues that raise investor concern. Through these we cover issues such as the extent of intra-group transactions, departures from conservative accounting and provide a summary of events that may have caused concerns in the past. Most of what we report as concerns is not wrong from a legal viewpoint but flags for investors what they should know.
■ We resist needlessly quantifying the qualitative parameters and creating a contrived scorecard. The purpose of the report is to provide the first snapshot of corporate governance details, rather than arrive at any comparative list of winners and losers.

Read the full report Here(Corporate India Handbook)