The capital market regulator has come down on ONGC and four other public sector companies for not populating half of their boards with independent directors.
The Securities and Exchange Board of India has begun adjudication proceedings against 20 companies on Tuesday, for not complying with corporate governance norms under Clause 49 of the Listing agreement.
In a statement Sebi said these 20 companies including the five public sector ones have defied provisions relating to board composition. Out of these 15, three companies have breached almost all major provisions of Clause 49. ?Proceedings have been initiated against two companies for non-compliance with provisions like board and audit committee composition and CEO/CFO certification. The other 10 companies have not submitted compliance reports to the stock exchanges,? Sebi said.
ONGC sources said they have received Sebi?s notice. The company has on board four independent directors as against the requirement of nine. Although IOC and BHEL have not received any such notice, they too are short of the required number of independent directors. While IOC has six independent directors against the requirement of eight, BHEL has five against the required six. GAIL also is short of by three and has three independent directors against the requirement of six.
Sebi said that it received quarterly reports from stock exchanges regarding compliance with Clause 49 of the listing agreement. ?Based on these reports, Sebi has initiated adjudication proceedings against 20 companies,? the regulator said.
Clause 49, which was enforced on January, 2006, has generated a lot of debate. Sebi chairman M Damodaran has time and again stated that the regulator would take stern action against erring companies. Clause 49 mandates that the CEO and CFO should certify the board that they have accepted the responsibility of establishing and maintaining internal controls for financial reporting and have independent directors occupying at least 50% of their board strength.
