Number of Directors on the Boards likely to be capped
Companies like SAIL, Bhel, IOC and Hindustan Aeronautics (HAL) may soon have to do some pruning at the top management level.
By Niranjan Bharati, TNN |
NEW DELHI: Companies like SAIL, Bhel, IOC and Hindustan Aeronautics (HAL) may soon have to do some pruning at the top management level. The government is considering a cap on the total number of directors in the board of Central Public Sector Enterprises (CPSE) at 10 or 11.
This is being done in order to make the board more efficient and cut down on costs. The number of independent directors which CPSEs would mandatorily have to employ if the government decides to list the PSUs will also go down when the board size shrinks.
���Companies like NTPC, BPCL, HPCL and Gail are performing well even with fewer directors on their board. We want other companies also to follow the same,��� a senior official in the department of public enterprises (DPE) said. Smaller boardswould also help the companies in complying with the corporate governance norms prescribed by DPE and Sebi, he said.
Among the navratna companies with larger boards, SAIL tops the list with as many as 22 directors while Nalco, HAL and IOC have 15 each. Bhel has 14 directors on its board. According to the clause 49 of the listing agreement of SEBI, companies are required to have 50% of their board members as independent directors, while DPE guidelines require all the CPSEs, whether listed or unlisted, to have 33% of the board members as independent directors.
According to a recent report published by the comptroller and auditor general (CAG) of India, as many as 30 of the 44 listed CPSEs were short of independent directors. The situation is worse for unlisted CPSEs. This became evident at the time of listing of PSUs like REC and PGCIL. The proposals got delayed by several months because of the problem of inadequate number of independent directors.
On the other hand, listed PSUs keep facing the fear of delisting for violating Sebi norms. In fact, capital market regulator Sebi had started disciplinary action against ONGC, IOC and BPCL last year for violating clause 49. Following the Sebi move, the government had to intervene in the matter.
This is being done in order to make the board more efficient and cut down on costs. The number of independent directors which CPSEs would mandatorily have to employ if the government decides to list the PSUs will also go down when the board size shrinks.
���Companies like NTPC, BPCL, HPCL and Gail are performing well even with fewer directors on their board. We want other companies also to follow the same,��� a senior official in the department of public enterprises (DPE) said. Smaller boardswould also help the companies in complying with the corporate governance norms prescribed by DPE and Sebi, he said.
Among the navratna companies with larger boards, SAIL tops the list with as many as 22 directors while Nalco, HAL and IOC have 15 each. Bhel has 14 directors on its board. According to the clause 49 of the listing agreement of SEBI, companies are required to have 50% of their board members as independent directors, while DPE guidelines require all the CPSEs, whether listed or unlisted, to have 33% of the board members as independent directors.
According to a recent report published by the comptroller and auditor general (CAG) of India, as many as 30 of the 44 listed CPSEs were short of independent directors. The situation is worse for unlisted CPSEs. This became evident at the time of listing of PSUs like REC and PGCIL. The proposals got delayed by several months because of the problem of inadequate number of independent directors.
On the other hand, listed PSUs keep facing the fear of delisting for violating Sebi norms. In fact, capital market regulator Sebi had started disciplinary action against ONGC, IOC and BPCL last year for violating clause 49. Following the Sebi move, the government had to intervene in the matter.
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