The rift between two sections of directors on the 12-member board of the Bombay Stock Exchange (BSE) has exploded into a bitter and public battle, following the resignations of chairman Shekhar Datta and director Jamshyd Godrej.
Among the several differences between the camps, a major bone of contention pertains to inducting representatives of BSE?s overseas strategic investors?Deutsche B?rse (DB) and Singapore Exchange (SGX)?on the board, something that Datta was believed to have been keen on.
A day after news broke of the resignations, capital market and broking circles were abuzz with theories as to why the two directors?both, well-known corporate personalities?put in their papers in such a huff. Datta declined to specify the reasons for his exit.
But sources tracking the development told FE that the two directors were unhappy with what they perceived as constant interference by a section of board members in the day-to-day management of the exchange, the country?s second largest and the fifth-largest in the world by transactions. Datta and Godrej, sources said, wanted the exchange be run on corporate lines, which it now is, with the board deciding the broad policy framework and protecting investor interests, and operations vested with a professional management team.
The sources said Datta was keen that foreign investors DB and SGX, each of whom have 5% in BSE, should also have representatives on the board as they could bring in expertise and perspective to the running of the exchange.
BSE has for long lagged behind in terms of turnover, especially on the futures and options (F&O) front, where rival National Stock Exchange (NSE)?the country?s largest?has a massive lead. NSE, it may be mentioned, has a director representing NYSE Euronext, which has a 5% stake in the exchange, on its board.
Be that as it may, sources said Datta was also unhappy about directors who were not contributing enough retaining their positions on the board. This also meant there were no vacancies for these strategic investor directors to be brought in.
However, one board source told FE there was no question of opposing the inclusion of strategic investor directors on the board and, in fact, BSE had taken representatives of DB and SGX on its committees. Saying the resignations could be for personal reasons, the source felt the controversy might have been blown out of proportion.
While the BSE board will now have to deliberate on the resignations, market regulator Sebi is keeping a silent but close watch on the entire issue. Sources in Sebi said there was nothing the regulator needed to do until the BSE board came up with specific requests or proposals. ?Two resignations have taken place, and the board will need to fill those vacancies,? a Sebi official told FE, ruling out a full review of the board?s composition at this point.
While BSE managing director & CEO Rajnikant Patel was unreachable for comment, despite several attempts, broking sources reacted with surprise at the developments. ?I was completely taken aback when I heard about the resignations,? said Ramesh Damani, a frontline BSE member.
While some said the resignations were aimed at bringing to the fore allegations of interference by a section of the board in the running of the bourse, there was also talk of problems in the management itself. These, however, could not be independently verified. Sources, however, also wondered why the chairman could not effectively counter interference from some directors, given the fact that there are only three trading members (brokers) on the BSE board and public interest directors, too.