New Delhi: The regulator of the capital market, Sebi, on Tuesday asked listed companies to split the roles of chairman and managing director before the deadline for April 2022, as the new directive is not aimed at weakening the position of promoters. It was initially expected of listed entities to separate the roles of chairman and managing director / CEO from 1 April 2020.
However, based on the industry representatives, an extra period of two years was given for compliance. The regulation now applies to the 500 best listed entities by market capitalization, with effect from 1 April 2022.
“At the end of December 2020, only 53 percent of the top 500 listed entities complied with this provision. I call on the eligible entities to be prepared for this change before the deadline, ‘said Sebi Chairman Ajay Tyagi during a virtual event hosted by Chamber of Commerce CII on corporate governance. He further said the idea for such a separation is not to weaken the position of promoters but to improve corporate governance. The purpose of such a separation is to provide a better and more balanced management structure by enabling more effective management oversight, Tyagi said.
‘If the roles are separated, excessive concentration of authority in a single individual will be reduced. Having the same person as chairman and managing director entails conflicts of interest, ”he added. Currently, many companies have merged the two positions as CMD (chairman-cum-managing director), which has led to some overlap of the board and management, which could lead to conflict of interest and consequently the regulator in May 2018 with his norms came out. to divide the post. The norms were part of the series of recommendations given by the Kotak Committee on Corporate Governance appointed by Sebi.
Regarding independent directors, Sebi chief said that it is the regulator’s aim to achieve greater balance, transparency and quality in the selection of independent directors and functioning of corporate boards. The market regulator, which recently came out with a consultation document on independent directors, said the newspaper was trying to strike a balance between the majority shareholders ‘right to the final decision and the minority shareholders’ ability to influence the same.
Regarding the disclosure by listed entities, Tyagi said that the boards of companies must ensure that adequate disclosures are provided to stakeholders in a timely manner and that there is no asymmetry of information. Such disclosures should have the impact of Covid-19 on business, performance and finance, he added.
Tyagi said listed companies, which raise funds from the public, with a credible and robust corporate governance framework, are ‘sacred’ to ensure transparency, remove asymmetry of information and strengthen investor confidence ‘. On the gender diversity in the corporate boards, Tyagi said that the Ministry of Corporate Affairs (MCA) and Sebi the regulation of women has definitely improved the representation of women in the corporate boards in India.
From about 5-6 percent of women on boards in 2014, the number increased in just one year in 2015 to 12 percent for top 500 companies. The number has gradually increased year-on-year and currently stands at about 17 percent for the top 500 companies. On an overall level, the figure is about 19 percent. In the OECD and developed countries, the figure is more than 25 percent.
Source: Telangana Today