Separation of CMD post must before deadline: Sebi chief

According to the Sebi rules, the top 500 listed firms are required to separate the roles of Chairperson and MD/ CEO before April 1, 2022.

Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi on Tuesday said the top 500 listed companies by market capitalisation should prepare to separate the roles of chairperson and managing director (MD) in their firms.

According to the Sebi rules, the top 500 listed firms are required to separate the roles of Chairperson and MD/ CEO before April 1, 2022. Tyagi, who spoke at the CII corporate governance summit, said as of December 2020, only 53 per cent of the top 500 listed entities have complied with this Sebi provision.

“Listed entities were initially required to separate the roles of chairperson and MD/ CEO from April 01, 2020 onwards. However, based on industry representations, an additional time period of two years was given for compliance.The regulation will now be applicable to the top 500 listed entities by market capitalisation, with effect from April 01, 2022 … I urge the eligible listed entities to be prepared for this change in advance of the deadline,” said Tyagi.

Sebi chief said that this rule will not weaken the position of promoters but improve corporate governance as separation of roles “will reduce excessive concentration of authority in a single individual” and also help “avoid conflict of interest”.

Tyagi said that in order to bring balance, quality and transparency in selection of independent directors and functioning of corporate boards, the markets regulator has floated a consultation paper to tighten the norms pertaining to remuneration, appointment and removal of independent directors of listed firms.

“..the proposals for appointment /re-appointment and removal of independent directors in our consultation paper, try to strike a balance between the majority shareholders’ right to the final decision and the minority shareholders’ ability to influence the same,” said Tyagi.

On gender diversity on corporate boards, Tyagi said while the representation of women on corporate boards have increased from 5-6 per cent in 2014 to 17 per cent in 2021, it is still below the 25 per cent mark currently in developed countries and the Organisation for Economic Co-operation and Development.

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