In view of the new SEBI rules on corporate governance, it has been observed that over 200 companies are falling short on the deadline to split the roles of Chairperson and Managing director.
In 2018, the Indian regulator SEBI advised the top 500 listed companies to appoint a Non-Executive Chairperson on their board. As per the recommendations the Chairperson should not hold the office of Managing Director or CEO, as has been practiced by most leading corporates including promoter-driven businesses.
According to a report by The Economic Times based on data compiled by nseinfobase.com, the Chairperson has an active executive role in around 213 companies, while 161 of them have chairperson acting as MD or CEO. These companies include Reliance Industries Limited (RIL), Hindustan Unilever, ONGC, Coal India, NTPC, Bharat Petroleum Corp and Power Grid Corp.
The new rules are based on the recommendations from a committee headed by leading banker Uday Kotak on corporate governance in 2017. The deadline for complying with these norms is April 2019. These norms don’t apply to companies that don’t have identifiable promoters as per the shareholding pattern.
In November Ajay Tyagi, Chairman of SEBI said that companies had been given sufficient time to comply with the requirement. The regulations “were notified in May 2018 and we made them applicable from April 2020. The idea was to make people understand and plan for it.” Tyagi said. He further added, “I agree with the argument that this may not solve it (corporate governance issues), but that doesn’t mean that you will not try to solve it.”
Although the rule varies around the world, SEBI believes that the separation of power is needed for a more balanced governance structure and for enabling effective supervision.
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