Capital markets regulator Sebi on Tuesday said the requirement to split Chairperson and Managing Director/Chief Executive Officer positions at listed companies will not be mandatory and will be implemented on a voluntary basis.
The decision was taken at a Sebi board meet on Tuesday.
Sebi had earlier asked listed entities to split the roles of Chairperson and MD before the April 2022 deadline. Listed entities were initially required to separate the roles of chairperson and MD/CEO from April 1, 2020 onwards. However, based on industry representations, an additional time period of two years was given for compliance. The norms were part of the series of recommendations given by the Sebi-appointed Uday Kotak committee on corporate governance.
"As the revised deadline is less than two months away, on a review of the compliance status it is seen that the compliance level, which stood at 50.4% amongst the top 500 Listed Companies as on September 2019, has progressed to only 54% as on December 31, 2021. Thus, there has been barely a 4% incremental improvement in compliance by the top 500 companies over the last two years, hence,expecting the remaining about 46% of the top 500 listed companies to comply with these norms by the target date would be a tall order," the market regulator said in a statement.
"Considering rather unatisfactory level of compliance achieved so far, with respect to this corporate governance reform, various representations received, constraints posed by the prevailing pandemic situation and with a view to enabling the companies to plan for a smoother transition, as a way forward, SEBI Board at this juncture, decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a “voluntary basis”," added Sebi.
Currently, many companies have merged the two posts as CMD (chairman-cum-managing director), leading to some overlapping of the board and management, which could lead to conflict of interest and, consequently, the regulator, in May 2018, came out with its norms to split the post.
Earlier this month, Finance Minister Nirmala Sitharaman had said the regulator should hear if Indian companies have a view on the matter even as she made it clear that she was not "giving a diktat".
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