The government is planning to reform rules guiding the selection and appointment of independent directors in state-owned companies, a move aimed at instilling greater transparency and haste into a ponderous process.
A parliamentary panel of experts studying the new Companies Bill is likely to come up with suggestions in this regard, said a corporate affairs ministry official, requesting anonymity. The development assumes significance in the wake of the government’s renewed efforts to quicken the share sales of many state-owned firms that are hamstrung by the lack of a requisite number of independent directors on boards. Market regulator Sebi’s guidelines require that 50% of a company board should be stuffed with independent directors.
Sebi also does not recognise government nominee directors on PSU boards as independent directors.
A search committee steers the selection of independent directors from a list of experts handed over by the ministry running a public enterprise, a process that often moves at a snail’s pace. The ministry makes appointments based on the committee’s recommendations. The process, even for listed firms, is also hobbled by intense tussles between ministers concerned and search committees selection.
“The present process, apart from being time-consuming, is often found inappropriate towards selecting the right people who can act independently,” the official said.
The move also comes as state-owned blue-chip firms SAIL, ONGC and IOC have reportedly asked the administrative ministries concerned to the fast-track the appointment of independent directors so that they can enjoy their newly-acquired Maharatna status. Only NTPC has been able to enjoy the enhanced financial powers that come with the status.
Recently corporate affairs ministry secretary R Bandyopadhyay, said the parliamentary panel studying the new Companies Bill may come up with suggestions towards improving corporate governance in state-run companies.
The new norms, apart from handing greater autonomy in the selection process for the company concerned, will look to devise a policy towards identifying positives such as integrity, expertise and managerial abilities in independent directors.
source : economic times