The Hindu Business Line : No exemption for listed PSUs on independent director norms

Differing perceptions: Mr M. Damodaran (left), Chairman, SEBI, and Mr R.S.Sharma, CMD, ONGC, at a programme on corporate governance, in the Capital on Wednesday.

Our Bureau

New Delhi, Jan. 2 There would be no dilution in the minimum number of independent directors on the boards of listed public sector undertakings (PSUs).

The Securities and Exchange Board of India Chairman, Mr M Damodaran, on Wednesday ruled out any change in corporate governance norms for PSUs as regards independent directors on their Boards.

“The suggested solution that corporate governance requirement be little less stringent for PSUs because of the existing challenges (oversight of Government agencies and parliamentary committees) is something that I cannot persuade myself to agree with. Notwithstanding all the challenges, the solution should be found elsewhere and not in dilution of existing prescriptive arrangements for corporate governance”, Mr Damodaran said at an event on corporate governance here today.

The SEBI chief’s response came to the suggestion by the ONGC Chairman and Managing Director, Mr R.S. Sharma, that SEBI must go with the Irani Committee recommendation of having one-third of the Board as independent directors rather than insist on the 50 per cent norm for listed PSUs. This would make ONGC’s functioning and decision making process more effective, Mr Sharma said.

Impediments

Stating that excessive regulations were impeding ONGC’s functioning as a competitive enterprise vis-a-vis the private sector, Mr Sharma said that most of the senior management time was spent on complying with the various regulations and meeting the requirement of Comptroller and Auditor-General, the Central Vigilance Commission and various Parliamentary committees.

The only area where ONGC, which is the country’s largest PSU and second largest by market capitalisation, had not been compliant with the revised clause 49 was in respect of independent directors, Mr Sharma said.

Mr Damodaran has, however, maintained in the past that if the law of the land (the new company law) prescribes the one-third norm for independent directors, SEBI would have no difficulty in complying with it.

Making his case today, Mr Damodaran said that corporate governance was the only area where there was a level playing field between the private sector and PSUs and that a solution on excessive regulations cannot be found by diluting that one item which public sector and private sector together have the same prescriptive arrangement to contend with. He said that large investments were flowing into Indian enterprises on the back of perception that Indian corporates are trying to get their act together on corporate governance and that the country was being seen as different in terms of the existing governance practices.