Despite efforts, independent directors not entirely independent: SEBI chief – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/companies/despite-efforts-independent-directors-not-entirely-independent-sebi-chief/article34256886.ece

Despite the many efforts, SEBI has not been able to ensure that all independent directors act without the influence of promoters to protect the interest of small shareholders, rued Ajay Tyagi, Chairman, Securities and Exchange Board of India.

In Tyagi’s view, despite SEBI’s best efforts, the ones who are genuinely not independent will never be. “It is true that human behaviour cannot be regulated by norms. However, it is our endeavour through improved processes and disclosures, to bring in greater balance, transparency and quality in the selection of independent directors and functioning of corporate boards,” Tyagi said.Recently, SEBI put out a discussion paper to make the role of independent directors more transparent. It suggested the appointment of an independent director such that retail shareholders are not subjected to unfair risks and no management/board-level decision dents the public’s trust.

Dual role

Tyagi also highlighted the need to separate the functions of the chairman and the managing director in a company. A large number of listed companies have the same person in both roles.

“Separation of the roles will reduce excessive concentration of authority in a single individual. The underlying idea for such a separation is not to weaken the position of the promoter, but to improve corporate governance,” Tyagi said

SEBI recently extended the deadline for the separation of the roles of chairman and MD to April 2022 for the top 500 listed companies. As of December 2020, only 53 per cent of these companies had complied with the SEBI norm.

Tyagi said globally, too, companies were moving to separate the roles of chairperson and MD/CEO.

“In the UK and Australia, the debate has tilted in favour of separating the two posts. Germany and the Netherlands have a two-tier board structure, separating the roles of board and management. The OECD also recommends that the two posts be separated as a good governance practice,” Tyagi said.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s