Separate chairman, CEO roles desirable, not mandatory: Sebi

Tags: SEBI, News
Capital market watchdog Sebi wants listed companies to voluntarily consider separating the posts of chairman and managing director as a good governance practice because making it mandatory may not be feasible yet.

The Securities and Exchange Board of India (Sebi) has expressed its views in the new corporate governance code, which listed companies need to implement by October 1. The code was cleared by the regulator's board and is being finalised for necessary notifications.

There have been suggestions that companies should have different persons for the roles of chairman and managing director (or chief executive officer) to avoid one person getting unfettered powers of management.

The requirement to segregate the roles is common in developed countries such as the US, the UK and France.

Sebi had sought feedback in its consultation paper on new corporate governance norms on the need to separate the positions of chairman and MD.

The new Companies Act provides for such a separation unless the articles of a company provide otherwise or a company does not have multiple businesses.

While a majority of the comments received in response to the consultative paper favoured mandatory separation of the posts, Sebi's Primary Market Advisory Committee (PMAC) recommended that separate posts not be mandated.

Agreeing with the PMAC recommendation, the regulator proposed that separate posts for the chairman and MD/CEO may not be mandated considering the extant provisions that mandate a higher number of independent directors if there is an executive chairman.

"However, it is proposed that the separation of the post of Chairman and MD/CEO may be implemented by companies as a good governance practice," Sebi concluded.

On a PMAC recommendation to have a majority of independent directors in the absence of a regular non-executive chairman, Sebi said this proposal appeared to be "too onerous."

"It is proposed to address the concern of PMAC by incorporating the provision that boards of companies which do not have a regular non-executive chairman shall have at least half of the board as independent," the regulator said.

In most public sector enterprises, as also many large private sector companies, the posts of chairman and managing director are held by the same person.

The PMAC had observed that the question of mandatory separation of chairman and CEO posts was not settled globally yet and a good number of companies already had different individuals for these positions.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Sebi must not be lax in weeding out mutual fund houses

    Last May, capital market regulator Securities and Exchange Board of India (Sebi) amended the Sebi (mutual funds) regulations, 1996, directing all fund

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Nigavekar

New model for effective education

After interacting with students and teaching community on a ...

Rajgopal Nidamboor

Let the spirit of sport pervade everyday life

Sport, like meditation, is nothing short of a spiritual act. ...

Shona Adhikari

Pop art is truly a feast for the eyes

The internationally reknowned Bruno Art Group’s presence in India had ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture