Sebi to cap number of directorships

MUMBAI: The Securities and Exchange Board of India (Sebi) may restrict number of company directorships a person could hold as part of its initiative to improve corporate governance in domestic corporates. Sebi’s corporate governance panel, headed by Infosys chairman Narayana Murthy is looking into the issue.
The panel will also consider various issues, including board agenda and reporting requirements, Sebi chairman GN Bajpai told reporters on the sidelines of a seminar organised by the Centre for Corporate Governance here today. Speaking at the occasion, the Unit trust of India chairman M Damodaran said, company boards should have a representation from diverse but relevant fields and one third to half the members should be whole time directors.
Disapproving the current practice of some persons sitting on 15-20 company boards, the UTI chief said, “this is not useful to a company and regulators like Sebi and the department of company affairs should lay down guidelines for limiting the number of directorships that a person can hold.�
The market regulator has been working towards improving corporate governance standards in the country. It is planning to have a system for rating of corporate governance to help stakeholders in assessing “how the corporate was functioning, creating value and sharing the same.� Mr Bajpai said, the company boards should not be a tea club packed with relatives, but should, with assistance of able directors, manage the affairs of the corporate.
The company board had tremendous power with large balance sheet size to make or mar the economy and fortunes of the company and investors, he said. The corporate functioning should be transparent and “stakeholders must know how their fortunes were being dealt with,� he added. The Sebi chairman also said that corporates should address the concerns of all stakeholders and not just of one section, like shareholders. If they concentrate only on the latter, corporates can’t perform effectively, he added.
Mr Damodaran also wanted the scope of board agenda to be reviewed, as currently they are burdened with a lot of items.