Government to question ministries for failure of PSUs to name independent directors

NEW DELHI: Worried over the lack of compliance by the listed state-run companies, the government will now seek details of the independent directors directly from the administrative ministries.

Some of the PSUs that listed on the stock exchanges in 2009-10 fiscal year still do not fulfil the criteria of independent directors. "We will be soon taking up the issue with all defaulting companies," a government official said, adding that under new norms Department of Public Enterprises, or DPE, can itself initiate the selection procedure four months before the vacancy arises.

Administrative ministries will be further required to intimate about the vacant independent director positions on a quarterly basis, so that there is no delay in the whole process, the official said. As per the database maintained by the DPE, a nodal agency for all state-run companies, most of the companies listed during 2009-10 period do not have the requisite number of independent directors on their board.

The defaulting companies include Power Grid, NHPC, Satluj Jal Vidyut Nigam, Engineers India and Oil India.
As per the estimates, around 300 posts of independent directors are lying vacant in staterun companies. As per Clause 49 of the listing agreement finalised by market regulator SEBI, a company should have 50% independent directors. The administrative ministries are required to start the selection process six months before the vacancy arises. They are also time-bound to submit the final list of candidates to the appointments cabinet committee (ACC).

Under the new norms prescribe by DPE, the final list will be valid for one year and the department is empowered to take this list to the ACC if the administrative ministry does not submit it within a month.

"The process was earlier complicated and tenuous. Now, we believe that the PSUs should not have any problem with appointment of independent directors," said an official with a PSU. Minister for Heavy Industries and Public Enterprises Praful Patel had earlier said that the quality of independent directors on the PSU boards ‘needs to be improved’ and had also pointed out that many PSU boards are being represented by people who have no domain expertise and little expertise.