Private firms disclose too little information
The government must make a bolder push for business transparency. The MCA’s database should host data that casts timely light on unlisted firms and reveals who really owns what
Every company has the right to keep information confidential that does not mandatorily have to be disclosed and could hurt its interests, should rivals and others get hold of it. Widely-held companies whose shares are listed for public trading, though, can face a negative market response if they stop revealing numbers they usually do, as Reliance saw this week. Its share price fell after it withheld its gross refining margin in its quarterly results. If markets are disclosure-sensitive for good reason, so are regulators tasked with watching out for anything that might hurt providers of capital or threaten the stability of our financial system. Transparency is the price a business pays for the privilege of limited liability. It is thus a good sign that the government has made it harder for promoters to take public limited companies private—a move often aimed at reducing the data that needs to be disclosed. On Monday, among other rule tweaks, India’s ministry of corporate affairs (MCA) withdrew a provision for automatic approval of such an application in case it elicits no official response within 30 days. The Centre is also reportedly keen to tighten a few laws so that auditors and company secretaries are pushed to exercise their fiduciary duties in proper alignment with all norms and rules. The more closely business operations are watched, the less scandal-prone they are likely to be.