Financial Daily from THE HINDU group of publications
Wednesday, Feb 18, 2004
Financial Daily from THE HINDU group of publications Wednesday, Feb 18, 2004 |
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Corporate Governance Corporate - Corporate Governance Revised Clause 49 of listing agreement — Murthy panel may redefine `independent director' to allay fears
Richa Mishra
New Delhi , Feb. 17 EVEN as the last word is yet to be heard on the implementation of the revised Clause 49 of the listing agreement dealing with corporate governance, the Securities and Exchange Board of India- (SEBI) appointed N.R. Narayana Murthy Committee is likely to suggest `relaxation' of certain norms proposed earlier. The Committee's earlier recommendations to revise Clause 49 were implemented in August 2003, but later put on hold following opposition from India Inc. The contentious issues included meaning of `independent directors' in the composition of the board and term of office of non-executive directors. According to highly placed sources in the Committee, the meaning of the expression "independent directors" in the clause relating to board composition is set to be modified. "As against the phrase `material pecuniary relationship', we are going to suggest `substantial material interest' to allay the grievances of corporate sector," sources said. The clause on "composition of board" had defined the expression "independent director" as a non-executive director of the company who apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its senior management or its holding company, its subsidiaries and associated companies. A person qualifying as an independent director would also be required to conform to a host of other requirements that have been prescribed under Clause 49. On the term of the non-executive directors, sources said the norm relating to a maximum tenure of nine years is likely to be modified to ensure the norm is applied only prospectively and not retrospectively. The August 2003 version of Clause 49 states, "A person would be eligible for the office non-executive director so long as the term of officer did not exceed nine years in three terms of three years each, running continuously". India Inc had held that this might create practical problems as it may prevent the promoters and directors protecting their interest from continuing on the board even while the promoters' investment in the company continues. On the norm that requires at least one independent director of a holding company to be a director of the subsidiary company, sources said that this stipulation is likely to be withdrawn.
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