Role of PSEB, DPE likely to be curtailed

NEW DELHI: To ensure fairness in the appointment of independent directors the government is considering to limit the responsibility with the Public Selection Enterprise Board (PSEB) and the department of public enterprises (DPE). ���It is proposed to end the administrative ministry���s role in shortlisting three names for the post of independent director in a PSU,��� an official said.

Currently, administrative ministries recommend names of three candidates for the post of an independent director in a PSU. A search committee comprising officials of DPE and PESB selects one of them for the post. Thus, administrative ministries indirectly control appointment of independent directors in their respective PSUs, which is against the principle of corporate governance.

If the new proposal is accepted, the search committee will be empowered to select and appoint a candidate and the administrative ministry will have no role to play in the process, the official said. This will not only expedite the process of appointing independent directors but also bring more transparency to the system. As per current practice, it takes almost a year to appoint an independent director. Recently, DPE had suggested PSUs to inform it six months in advance regarding any such vacancies.

���As of now we do fulfil the guidelines of the Securities & Exchange Board of India (SEBI) with regards to appointment of independent directors. Questions have been, however, raised on the prevailing selection procedure. The new proposal, if accepted, would dispel such doubts,��� a government official said.

The move would especially help public sector enterprises (PSEs) considering public listing. The market regulator SEBI had earlier said directors nominated by administrative ministries cannot be considered as independent directors. It, however, accepts nominees of financial institutions as independent directors for listed PSUs.