Sebi wants PSUs to ensure compliance on independent directors

New Delhi: To ensure good corporate governance practices, markets regulator Sebi has asked the government to ensure that listed PSUs are in full compliance with the norms relating to independent directors.

Sebi has also begun 'sensitising' non-compliant Public Sector Undertakings (PSUs) directly about the norms mandating a certain percentage of independent members on their boards, a top regulatory official said.

While the government has assured Sebi that necessary action has been initiated to ensure compliance, the regulator on its part has initiated preliminary action against some of the companies while ruling out any leeway to the PSUs vis-a-vis their private sector peers.

Sebi is also firm on all listed state-run firms having at least one woman director on their respective boards without any further delay, and also increase their public shareholding to minimum 25 per cent within stipulated timeframe.

While there is still time left for listed PSUs to have minimum 25 percent public holding, the non-compliance on the woman director front is very low now, the official added.

As per the data compiled by Corporate Professionals, a leading advisory firm, only four PSUs are non-compliant with the requirement of at least one woman director, but as many as 14 do not have required number of independent directors.

All listed firms, including PSUs, without required number of independent directors have been intimated through the stock exchanges to ensure compliance at the earliest, the official said, while warning of necessary action in case of further delay in meeting the requirements.

However, some of these companies including PTC India have questioned their names being included in the list of non- compliant firms, saying they are in full compliance.

In reply to a communication from stock exchanges about non-compliance, PTC India has now cited an expert legal opinion to state that it was in full compliance with its board having more than 50 per cent non-executive directors and over one-third independent directors.

Sebi's Listing Obligations and Disclosure Requirements (LODR) Regulations do not differentiate between private and public sector listed companies for board composition.

Under these norms, not less than 50 per cent of the board members should be non-executive directors.

If the chairperson of the board is a non-executive director, at least one-third of the board needs to be independent directors. In case of a listed company not having a regular non-executive chairperson, at least half of the board members need to be independent directors.

The board of a listed company also needs to have at least 50 percent independent directors in case of the regular non-executive chairperson being a promoter of the listed company or being related to any promoter or a person holding a board-level or a top management position.

Commenting on the non-compliance at PSUs, Corporate Professionals' Founder Pavan Kumar Vijay said, "Since the government has a long consultancy process and passes through many channels to appoint the best available persons in PSUs, undue delay is bound to take place in the selection process of Independent Directors.

"It is a common phenomenon that because of robust selection process of the government, many a times top-most positions in PSUs remain vacant for a considerable time."

He suggested drawing up a panel of at least 200-300 independent directors, keeping in view their credentials and expertise, and hosting their particulars and profiles on the MCA (Ministry of Corporate Affairs) and Sebi websites to facilitate PSUs to appoint the directors as per their requirements without any delay.

"When it comes to Sebi, every company is same whether it has private promoters or the government is the promoter," a top Sebi official said.

He said that the government has given an assurance that all listed PSUs would meet 25 per cent minimum public shareholding within prescribed timeframe.

"The Finance Minister has also directed the concerned officials to ensure compliance," he added.