Market regulator Securities and Exchange Board of India (SEBI) has extended the deadline by two years till April 2022 for companies to comply with its directive to separate the roles of chairman and managing director (MD).
As per the SEBI norms, the top 500 listed entities by market capitalisation had to follow the directive of separating the roles of chairperson and MD or chief executive officer (CEO) with effect from April 1, 2020.
The norms were aimed at improving corporate governance structure of listed companies.
Now, the regulator has deferred the date of implementation of the regulatory provision to April 1, 2022 without assigning any reasons thereof.
Meanwhile, sources have said that this decision was necessitated due to demand from corporates as well as to ease the compliance burden amid the current economic situation.
SEBI has been receiving various representations with respect to the regulatory requirements from industry bodies including FICCI and CII. The representations highlighted the present levels of unpreparedness of listed entities to comply with the directive.
Currently, many companies have the two posts merged as CMD (chairman-cum-managing director), leading to some overlapping of the board and management, which could lead to conflict of interest and consequently the regulator in May 2018 came out with its norms to split the post.
The norms were part of the series of recommendations given by the SEBI-appointed committee headed by Uday Kotak on corporate governance.
Data from stock exchanges reveal that presently, only around 50% of the top 500 listed entities are in compliance with the regulatory provision. This list is led by the largest firm, Reliance Industries Limited, where Mukesh Ambani continues to be the CMD.
Statistics gathered indicate that there are 213 companies which still have chairpersons holding executive positions. In 161 of these, the chairperson is also discharging the functions of the MD or CEO. RIL is one such company; others in the list include Hindustan Unilever, ONGC, Coal India, NTPC, Bharat Petroleum Corporation and Power Grid Corporation.
With PTI inputs