new Delhi: There is news of relief for corporate India from market regulator SEBI. SEBI has extended the term of separation of the post of chairman and MD in the top 500 companies in terms of market capital by 2 years. In companies, now the rule of separation of the post of chairman and MD will come into effect from April 1, 2022.
However, it is important to clarify that the rule has not been repealed. Rather it has been avoided. SEBI had issued a directive in May 2018 based on the recommendations of the Uday Kotak Committee on Corporate Governance. Banks were granted an extension till 31 March 2020. The objective of SEBI was that it would improve corporate governance of companies.
According to the rule, the post of chairman in companies will be of non-executive role. The focus of the chairman will be on strategy and monitoring the functioning of the company, while the responsibility of MD will be to look after the regular functioning of the company.
No reason has been given by SEBI to postpone the implementation but it is believed that it was demanded from Corporate India. Companies argued that the environment of the economy was not good. In such a situation, it will not be right to implement any major changes. Because companies will have difficulty in compliance.
At the same time, there may be instability due to the reshuffle in management of many companies. In companies like Reliance Industries, Coal India, ONGC, both chairman and MD have not been divided.
In fact, more than half of the 500 companies have become compliant. But it was yet to be implemented in many big companies. It is being said that to stop this, a request was made from the Finance Ministry to the Prime Minister's Office. However, according to Sebi officials, companies were given a long time to implement this proposal. The implementation of the proposal came in May 2018.
According to experts, extending the deadline is fine. But this proposal should be implemented in order to improve corporate governance. This will raise hopes of improving the functioning of companies.
With the implementation of the rules in detail, companies will get time to choose better candidates for the post of Chairman and MD.