Indian Oil Corporation, ONGC, GAIL need more directors to meet criterion
Indications arethat the Ministry of Company Affairs may prescribe the minimum number of independent directors requirement through rules at a later stage once the proposed law is enacted.
New Delhi, May 4
With fair indications that the proposed revamped company law would prescribe a minimum one-third representation of independent directors on company boards, leaving the rest to the sector-specific regulators to decide, the Petroleum Ministry seems to be scouting for a lesser number of such directors to be on the boards of State-owned oil and gas companies.
Senior Petroleum Ministry officials said the Ministry was in favour of the one-third representation of independent directors and had accordingly forwarded a list of names to the concerned authorities. In order to meet the requirements of the Securities and Exchange Board of India revised Clause 49 of Listing Agreement, which came into effect from January 1, the oil and gas companies in the public sector such as GAIL (India) Ltd, Indian Oil Corporation and Oil and Natural Gas Corporation each needed at least five more independent directors.
As per the revised Clause 49, company boards should have an optimum combination of executive and non-executive directors with not less than 50 per cent of the board comprising non-executive directors and where the Chairman of the board is an executive director, at least half of the board should comprise of independent directors.
If the criterion of one-third is accepted, public sector oil companies would require one or two more independent directors on their boards, official sources said.
Indications are that the Ministry of Company Affairs may prescribe the minimum number of independent directors requirement through rules at a later stage once the proposed law is enacted.
In order to meet the requirement of Clause 49, Indian Oil and GAIL needed five more independent directors, and ONGC needed seven more. However, for having one-third representation, Indian Oil would require two more, GAIL would need one more and ONGC would require two more independent directors.
Though the Article of Association of Indian Oil provides for 22 directors on the board of the company, it has eight functional directors, including the Chairman, two government nominees, one-navratna representatives, and five independent directors.
GAIL has six functional directors including the CMD, two government nominees and three independent directors. Its total board strength as per its Article of Association stands at 20.
In the case of ONGC, the stipulation is that the board strength cannot exceed 21. As of now, ONGC's board has 13 members seven functional directors including executive chairman, two government nominees, one Indian Oil nominee (shareholder) and three independent directors.