In what could come as a blow to India’s corporate honchos including the top names including Mukesh Ambani, Azim Premji, Gautam Adani and many others, capital markets regulator SEBI has accepted a proposal to split the positions of Chairman and MD/CEO for at least 500 largest companies.
In what could come as a blow to India’s corporate honchos including the top names including Mukesh Ambani, Azim Premji, Gautam Adani and many others, capital markets regulator SEBI has accepted a proposal to split the positions of Chairman and MD/CEO for at least 500 largest companies. The proposal was among 40 suggestions, made by a panel headed by banker Uday Kotak, that SEBI accepted without objections. The Kotak panel had made 80 recommendations on a host of issues as part of the SEBI’s efforts to improve corporate governance.
Among its key recommendations, Kotak panel had suggested ‘role segregation’ by splitting the position of Chairperson and CEO/MD by April 2020 for top 500 entities by market capitalisation. “Separation of CEO/MD and Chairperson (to be initially made applicable to the top 500 listed entities by market capitalization w.e.f. April 1, 2020),” SEBI said in a press release after yesterday after its board meeting.
In view of this decision by SEBI, top business honchos namely Mukesh Ambani (Reliance Industries), Azim Premji (Wipro), Gautam Adani (Adani Port), and others who hold twin responsibilities in their respective organisations will have to step down from one of their corporate roles once the recommendations of the Kotak panel are implemented.
Market experts had lauded this recommendation as a step towards improving the corporate governance standards in the country. “Such a decision will help in improving governance standards in listed companies,” Pranav Haldea, MD, Prime Database, said to FE Online in an interaction today. “It will also provide structural advantage to company’s board to act independently,” he added. There are 640 NSE-listed companies where the same person holds both the roles of Chairman and Managing Director, a report released by Prime Database research in October 2017 had said.
However, some others expressed their skepticism over the practical benefits of the move. “It’s not a big deal for such corporate honchos who hold twin responsibilities, as they will easily handover one of the roles to a member of their family,” Deepak Shenoy, CEO, Capital Mind, said to FE Online, adding: “For me, it doesn’t make much of a case.”
The Kotak Panel was formed by the SEBI in June 2007 to suggest recommendation for improving corporate governance standards of the listed entities in India. The report was submitted by the committee on 5 October, 2017. Among various recommendations, one was about separation of powers of the Chairperson and CEO/MD. The panel headed by Uday Kotak had said that such a measure may provide better and much more balanced governance structure as it will enable better and more effective supervision of the management.