Sebi’s rethink: Splitting CMD post made voluntary - Times of India

Sebi’s rethink: Splitting CMD post made voluntary – Times of India


MUMBAI: Markets regulator Sebi on Tuesday made separation of the post of chairman and managing director (CMD) voluntary, citing “unsatisfactory level of compliance among top listed companies”.
Since March 2018, when the Sebi board had changed the rules to separate the post of CMD and said the chairman of a listed company should not be related to the promoters, there has been a lot of pushback from India Inc.
After postponing the compliance deadline once, from April 1, 2020, by two years, finally on Tuesday Sebi backtracked on its decision and said companies were at liberty to decide if they wanted to split the post of CMD. The Sebi decision came days after finance minister Nirmala Sitharaman said that the regulator should address concerns of Indian companies although she had clearly added that she was not giving any diktat to the markets regulator.
A Sebi release after its board meeting noted that there was “rather an unsatisfactory level of compliance achieved so far” by listed companies in adhering to Sebi’s mandate to split the CMD post. The FM also addressed Sebi’s board.
In July 2018, Sebi had set up a committee to review corporate governance rules and suggest changes. It was headed by Uday Kotak, the main promoter of Kotak Mahindra Bank. One of the main recommendations by the committee headed by Kotak, who himself was a promoter-director of one of the leading private sector lenders, was that the post of CMD should be split.
This was done to help leading Indian companies adhere to international corporate governance standards, most of which follow the practice of separation of the board and the management. The idea was to allow a board headed by an independent person to oversee the operations of the management that will be headed by the MD. The pushback from promoter-driven companies was immediate which finally, after four years since making it mandatory, culminated into Sebi going back on its decision, sources said.
Despite India Inc getting a four-year window to adhere to the rule, so far only 54% of the top 500 companies had split the post, Sebi data showed. In the last two years, only 4% of the companies had adhered to the Sebi mandate. “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,” Sebi said.


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