Clause-49: SEBI strict on enforcing it

NEW DELHI: Warning of punitive action against listed companies that failed to appoint independent directors by the December 31, 2005 deadline set by it, market regulator SEBI has asked for information from bourses by next week about India Inc's level of compliance to corporate governance norms.

SEBI chairman M Damodaran also made it clear that the regulator will not spare even state-owned companies if they were found guilty of not complying with Clause-49 of Listing Agreement, which stipulates that independent directors should comprise 50 per cent of board's strength if it has an executive chairman.

If the chairman is non-executive, the independent director should comprise only one-third of the board's strength.

"I am not going to give anyone any more time (to comply with Clause-49)," he said after a SCOPE conference.

He did not subscribe to the view of a PSU chairman that there was not enough time to appoint directors.

"The Kumarmangalam Birla committee on corporate governance had submitted its report in 1999. This is 2006. Is it not a long time? We had set the deadline for March 31 and then extended it by another nine months," he said, indicating companies not complying with corporate governance norms would have to pay penalties.

SEBI has already asked bourses to submit information on the extent of compliance by listed companies. "It will be seen in another 10 days," Damodaran said.

Asked whether SEBI would look into the quality of independent directors, Damodaran said: "It is for the board to decide." The SEBI chief was not averse to politicians becoming directors as long as they had professional backgrounds.