Separation Of Chairperson, MD Roles At Listed Firms Will Be Voluntary, Says Sebi

The capital market regulator had earlier asked listed companies to split the roles of chairperson and MD before the April 2022 deadline

The norms were part of the series of recommendations given by the Sebi-appointed Uday Kotak committee on corporate governance. Image: Getty

New Delhi: Securities and Exchange Board of India (Sebi) on Tuesday said the need to split chairperson and managing director/chief executive officer positions at listed firms is not be mandatory and will be implemented on a voluntary basis. The decision was taken at a Sebi board meet on Tuesday.

The capital market regulator had earlier asked listed companies to split the roles of chairperson and MD before the April 2022 deadline. Listed entities were initially required to separate the roles of chairperson and MD/CEO from April 1, 2020 onwards. However, based on industry representations, an additional time period of two years was given for compliance. The norms were part of the series of recommendations given by the Sebi-appointed Uday Kotak committee on corporate governance, according to reports.

The Sebi in a statement said, “As the revised deadline is less than two months away, on a review of the compliance status it is seen that the compliance level, which stood at 50.4 per cent amongst the top 500 listed companies as on September 2019, has progressed to only 54 per cent as on December 31, 2021. Thus, there has been barely a 4 per cent incremental improvement in compliance by the top 500 companies over the last two years, hence, expecting the remaining about 46 per cent of the top 500 listed companies to comply with these norms by the target date would be a tall order."

Sebi in its order said, "Considering rather unatisfactory level of compliance achieved so far, with respect to this corporate governance reform, various representations received, constraints posed by the prevailing pandemic situation and with a view to enabling the companies to plan for a smoother transition, as a way forward, Sebi Board at this juncture, decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a voluntary basis."

Currently, many companies have merged the two posts as CMD (chairman-cum-managing director), leading to some overlapping of the board and management, which could lead to conflict of interest and, consequently, the regulator, in May 2018, came out with its norms to split the post.