PSU independent director norms fixed

NEW DELHI: The government has stipulated that independent directors should comprise at least half of the boards of public sector undertakings (PSUs) in the case of companies with an executive chairman. In the case of boards headed by non-executive chairman, at least one-third of the board members should be independent. Guidelines to this effect were finalised by the Union Cabinet here on Thursday.

The Cabinet approved the guidelines on corporate governance for central PSUs, information and broadcasting minister P R Dasmunsi said after the Cabinet meeting.

“The board of directors must have an optimum combination of executive and non-executive members,” he added.The exact number of independent directors on a company’s board would depend on whether the chairman is executive or non-executive, Mr Dasmunshi said. The new guidelines will be applicable to PSUs which are not listed. The decision is expected to improve corporate governance in central PSUs.

The government has specified that ‘independent director’ means those who do not have any material pecuniary relationship or transaction with the company, its promoters, management or subsidiaries except receipt of director’s remuneration. Representatives of financial institutions would be considered ‘independent’ directors except in the case of government companies.

All pecuniary relationship or transactions of the non-executive directors vis-a-vis the company concerned should be disclosed in the annual report, say the new guidelines.