Press and investor expectations

K Kannan

1995

The press, particularly the financial press, has now firmly established itself in our country, thanks to the burgeoning stock market activities and the rapid growth of the equity cult. Apart from the mainstream newspapers and magazines specializing in financial and business journalism, even smalltime newspapers and the vernacular press are involving themselves in this field for more than one reason. In addition to informing and educating the investor-public, this new found opportunity has opened a wide vista of advertisement revenues for these papers due to the explosive growth of public issues of securities arising out of the liberalization measures initiated by the government. The print media has a direct and widespread reach to the vast and growing investor population, and as such, has become a very key vehicle in dissemination of information about business enterprises and their varied activities including public issues of companies.

The vast retail base of investors by spreading the equity culture beyond the geographical jurisdiction of the metros has been one of the valuable contributions of the press. There are papers of various kinds, namely, mainstream national newspapers with separate sections for business, financial and economic press specializing in this chosen field, language press with a page or a few columns allotted to this segment on a weekly or fortnightly basis – all of them trying to inform and educate the investor-public of the country about the goings on in the capital market and corporate sector. It is time that the role of the press vis-à-vis the investor is objectively analyzed to find out how far the press has influenced the investor psyche in capital formation and also how objectively the press has discharged its responsibilities in this matter. During the course of the past three to five years, press reports and comments have played a crucial role in the determination of the investment decisions of the public. May be, investors are guided by a number of newspapers and magazines particularly what has been written by the financial journalists. It is a moot point whether investors are solely guided by the contents in the press reports. In a study of the investor reactions, it was discovered that the press reports and comments do play a vital role, but they have been only one of the inputs for the determination of the investment decisions of the public.

Financial journalism itself has undergone a metamorphosis during the last three to five years and reporting styles are gradually changing with a new wave of financial analysis and in depth studies not only in the filed of corporate performance but also in the public issue segment as well. But, this innovative work has remained the exclusive preserve of a new high-flier in the field. However, it will be necessary for the vast investor-public to be informed properly and educated sufficiently if the press could be said to have played its role in reaching out the large and widespread body of investors spread throughout the length and breadth of the country. It is agreed that it will not always be possible for smaller papers to opt out for highly specialized material of value to the investors. However, if public interest is supreme and reader – interest is paramount – as it should be – every paper is expected to purvey what is really the best bet for its readers in the investment world with competition fierce and investible funds in the kitty limited. In addition, it is expected that the journalists doing the rounds in the business circuit do have a minimum modicum of knowledge, experience and expertise to analyze the various inputs, dissect the fund of information available through painstaking research for the better understanding of the ordinary, grass root and common investor dispersed on a wider canvas.

If the above premise is accepted, then, it is necessary to find out how far the press has fulfilled the expectations of the investor-public.

The investor expectations can be broadly categorized into two segments, one relating to issue of securities to the investor public with the trappings of openness, transparency, risk for making investment decisions; and, the second one relating to the capital market industry as a whole involving education of investors to give them a lead touching on larger macro issues to bring about a transformation in the psyche of corporate managements and thus achieving investor friendliness and accountability.

Dealing with the issue of securities to the public, it can be safely said that the press reports and comments are a key input in the determination of the investment decisions of the investor community. While the investors are indeed grateful to the press for providing whatever information and assessment of these issues, it has to be pointed out that investors, particularly the rural and semi-urban grass root investor, not having the requisite knowledge of the nuances of the capital market and expertise to make their own assessments of the public offerings and the skills to chose the right type of profitable investments, look to the press to give a lead to them with appropriate guidance for their investment decisions. As public interest is of paramount importance and the press has the reader-interest as its ultimate goal, there is a specific responsibility cast on the press to play the ball accordingly. This would call for specialized knowledge of the field from the concerned journalists, objectively in their approach and output, provided by them and some semblance of accountability as well. Perhaps, this was one reason the Malegam Committee had made recommendations that the press should evolve a code on its own in consultation with the Press Council on corporate and stock analysis.

If we look at the larger number of newspapers and magazines and their coverage of the capital market industry in the whole country, it appears there is a lack of seriousness, depth and guidance in the output churned out by the journalists concerned. Pedestrian information and insipid figures that are even otherwise available to the public in the abridged prospectus (along with the application form) are purveyed for consumption by the investors. Most of the times, excerpts from press releases which are themselves prepared by the PR outfits glorifying the complimentary features of the companies and their performance (which could therefore be motivated) are reproduced verbatim, which does not really help the investors. On the other extreme, there is a segment of the press that publishes specialized jargon and graphics, which cannot be easily understood by the common investor who has no use for these materials. With recent reports about gifts generously distributed by the corporates at the press conferences and other favours shown, the ordinary investor has even nagging doubts whether journalists are performing their functions in informing, educating and guiding the investor without bias or whether there is a price-tag for the write-ups in print. If the press can find fault with shareholders for getting gifts at their Annual General Meetings from their own companies for which they have contributed their capital, it will not rebound to the credit of the press, if it is true, if they succumb to these temptations offered by companies. One only hopes that the journalists will not sell their soul even if they accept complimentary, which could be just deemed courtesies from the management of companies.

However, investors expect the press to convey to them a balanced view of the favourable and more particularly the adverse points relating to these public issues and also an in depth assessment of comparative performance of other units in the same industry and also the implications of various hidden material which are cloaked in the small print between the lines. That way the interest of the investor public will be better served and the press could be said to have really guided them in their investment decisions.

The press has taken a keen interest in the growth and development of the capital market in the last few years. Some murky goings-on in the industry have also been unearthed, like the bank/stock scam, MS Shoes public issues, etc. But for the press and its crusading spirit, these would not have surfaced doing great harm to the investors, industry and the economy as a whole. The investor public salutes the press for this unrelenting determination to act in public interest. Investors expect that the press will not rest on its oars but go on with a relentless determination to serve the common cause.

While corporate performance and public issues have been staple food for business journalism so far, there are other issues, which are of vital concern to the economy, capital market and corporate sector as well. The investor expects that the press would also bestow some of its thoughts on these crucial issues that will go a long way in laying the foundations for building the edifice of an investor-friendly corporate sector, efficient capital market and a sound economy. Some stray thoughts occur over which the press has not focused its spotlight adequately. Given below are some of them, which if highlighted in the press, will serve the common cause of the investor who is the final arbiter in the capital market. Though SEBI is the regulatory authority for the entire capital market and the Department of Company Affairs (DCA) is charged with the responsibilities of over-seeing corporate managements, there can be no doubt that these two authorities, have signally failed to protect the interest of the investors. May be, these authorities have other more important concerns and have no time for coming to the rescue of the grass root small investor who provides the wherewithal for the capital market!

What is required is an exclusive agency dealing only with investor grievances. With these two agencies failing in their task, which is very often written about in the press, the press has not come out with any alternative model of a redressal mechanism. For example, the various investors associations, which are gradually losing their faith in SEBI and DCA have been espousing the cause of a separate institution of an Investor Ombudsman for the country. The Ombudsman has already made an advent in the banking industry and is gradually being extended to other spheres. The press, it is sad to say, has not adequately taken up this matter and agitated for institutionalizing an Investor Ombudsman for the country as a single exclusive agency to look into and redress the grievances of investors.

Another area that has been overlooked by the press is about the various authorities playing down the role of the retail investor. The structural reforms initiated by the government have tried to marginalize the small investor through various measures. The high-fliers like foreign institutional investors, mutual funds and financial institutions are the prima donna in the eyes of SEBI, who are wooded and charmed as if establishing a wholesale market with institutional players will deliver in one stroke what government wants from the capital market. The capital market has now seen the experience of placing undue reliance on these agencies and the havoc wrought by them with the stock exchange in doldrums. The lesson has been learnt the hard way that what provides liquidity in the market is the role of the small investors in large numbers. This stark reality of today’s market has not been highlighted in the press.

The companies Bill, 1993 provided for an Investor Protection Fund. Though the Bill has not been passed by the Parliament so far into an enactment, it was surprising to note that the government is having second thoughts about this Fund. This Fund is modeled on th Consumer Protection Fund. The proposal was for a corpus coming from the unclaimed dividends lying idle, and which were pocketed previously by the companies and now by the government. Such undue enrichment of the investor’s monies by the companies or the government is condemnable and has not received sufficient attention in the press columns. Several hundreds of crore of rupees belonging to the ordinary investor and which does not belong to the companies are being misused by these companies for their own benefit much to the chagrin of the investors. All these monies can be put in an Escrow Account and be mobilized for providing a corpus. The income earned there from could be channelised for various investor-oriented purposes particularly for investor education to make the small investor a smart investor. The press may take up such macro issues of great importance (which will provide long-term relief to the investor public), find out the volume of such undue enrichment and suggest the best means of utilization of the funds for the investor cause.

Talking of macro issues, the Morgan Stanley case comes to one’s mind. The Supreme Court has decided in this case that an applicant for shares/units before allotment is not a “consumer” within the meaning of Consumer Protection Act, 1956. This landmark judgment has harmed the interest of the investor grievously and this requires to be rectified suitably. A Review Petition has already been filed by investor bodies that are pending consideration of the Supreme Court. A similar situation arose in the case of MRTP Act and an amendment to reiterate that an applicant before allotment was a consumer was enacted to rectify the situation. This vital issue has skipped the attention of the press. The press taking up this matter in all seriousness through write-ups and editorials would have sufficient effect to help the investor community. The press needs to come out of its unconcern and highlight such larger issues, which have a profound impact on the ultimate welfare and benefit to the investors.

While the press is interested in what is happening in the boardrooms (even bedrooms) of the companies for publishing juicy stories, it will serve the cause of investors better, if an issue like Rjindra Sachar Committee’s recommendations on the use of proxies at the Annual General Meetings of companies and allowing investor groups to plead the cause of the investors at these meetings using these proxies, is agitated in the columns of the press, thus bringing pressure on the government to accept this recommendation for adoption. Everyone knows that today’s Annual General Meetings are a farce and more participation by the investors and investor groups should be encouraged if corporate democracy should have some meaning. Justice Rajindra Sachar made his recommendation more than 15 years ago suggesting more active role for investor groups at the Annual General Meetings through an amendment to Company Law. But this remains a dead letter even now. This is particularly relevant today because of the vast growth of the shareholder base in the country and the propensity of corporates to take the investors for a ride.

There are several other issues which are of great relevance and deep concern to the investors but which are glossed over by even the mainstream financial press. For example, the press has a right of information to educate the investors and should therefore also have a right of attendance at the Annual General Meetings as these AGM’s are public affairs. Similarly, even the Annual Reports of SEBI, which is a public authority of vital importance to the capital market are not discussed in the columns of the financial press assessing its performance and highlighting its achievements as well as its failures.

The press willy-nilly has become the guardian of public interest today and is showing keen interest in the growth of the capital market. It has therefore to address itself to several macro issues of vital concern without fear of favour, and fulfill the investor expectations. It is hoped that the press will live up to these expectations, serve public interest and thus earn the goodwill of millions of investors in the country.