Mumbai: The market regulator Sebi on Tuesday made the separation of the position of chairman and the implementing director (CMD) voluntarily, quoting “unsatisfactory compliance levels among registered companies”.
Since March 2018, when the Board Sebi has changed the rules to separate the CMD post and say the chairman of the registered company should not be related to the promoter, there have been many pushbacks from India Inc.
After postponing the compliance time limit of one day, starting April 1, 2020, in two years, finally on Tuesday a retreated on his decision and said the company was in Liberty to decide whether they wanted to divide the cmd post.
The decision had occurred a few days after Finance Minister Nirmala Sitharaman said that the regulator had to overcome the worries of Indian companies even though he clearly added that he did not give dictates to the market regulator.
The release after the council meeting noted that there was “the level of unsatisfactory compliance achieved so far” by the company registered in following the SBI mandate to divide the CMD post.
FM also discusses the sebi board.
In July 2018, Sebi has established a committee to review the rules of corporate governance and suggest changes.
It was led by Uday Box, the main promoter of the Mahindra Bank box.
One of the main recommendations by the committee led by the box, who is a promoter-director of one of the leading private sector lenders, is that the CMD post must be shared.
This is done to help leading Indian companies adhere to international corporate governance standards, which mostly follow the practice of council and management separation.
The idea is to allow the board to be led by independent people to oversee management operations that will be led by MD.
The pushback of companies driven by direct promoters was finally, after four years since making it mandatory, peaking to Sebi will return to his decision, said the source.
Although India Inc.
get a four-year window to comply with the rules, so far only 54% of the top 500 companies that divide the post, Sebi data shows.
In the past two years, only 4% of companies obeyed the mandate.
“Therefore, expecting the remaining 46% of the 500 top-registered companies to comply with these norms with a date target will be a high demand,” Sebi said.