In major relief to India Inc, SEBI makes separation of CMD post ‘voluntary’ – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/todays-paper/in-major-relief-to-india-inc-sebi-makes-separation-of-cmd-post-voluntary/article65054058.ece

Bowing to industry pressure, the SEBI Board on Tuesday decided to change its earlier mandate of top 500 listed companies separating the post of chairman and managing director from April 1, to a “voluntary” provision.

The decision, which came at the Board’s meeting in the capital, has come as a huge relief for India Inc, especially when only 54 per cent of the top 500 listed companies had complied with this requirement as of December 31, 2021.

SEBI attributed the latest decision to two factors primarily. One, the “unsatisfactory level of compliance so far”, and the other, the continued representation from industry bodies and corporates citing compelling reasons and challenges for not being able to comply with this regulatory mandate.

Sanjiv Bajaj, CII President-Designate and Chairman and Managing Director of Bajaj Finserv, had at a recent CII post-Budget meeting, urged Finance Minister Nirmala Sitharaman to “intervene” in the matter, which he described as “regulatory overreach” by SEBI and would create a lot of problems for Corporate India. Sitharaman had, at that meeting, “nudged SEBI to hear their concerns”.

As part of governance reform, the market regulator had amended its Listing Agreement to specify that from April 1 this year, the post of chairman and managing director should be separated, that the chairman should hold only a non-executive post, and the chairman and managing director should not be related (per the definition of the term “relative” under the Companies Act). The proposal for separation of the role of chairman and MD/CEO of listed companies had come in March 2018. That May, the Listing Agreement was amended to introduce this norm with effect from April 1, 2020, for top 500 listed companies. However, in january 2020, the deadline was extended by two years.

Industry response

Reacting to the SEBI move, CII Director General Chandrajit Bannerjee said the industry body welcomed the decision and highlighted that the CII had submitted that the amendment with regard to separation of roles could lead to over-regulation and act as an impediment to a conducive business environment.

Subhrakant Panda, Senior Vice-President, FICCI, termed the move “a step in the right direction”. “There are already several checks and balances to ensure that governance in listed companies can be as good as it can be and this norm is not necessarily something that adds significantly to them,” he added.