Companies

Independent directors: over 500 posts lie vacant in public sector enterprises

Shishir Sinha Updated on January 23, 2018

Inddirects

7 state-run banks await MD & CEO





Over 500 posts of independent directors are lying vacant in Central Public Sector Enterprises and seven Public Sector Banks are yet to get Managing Director-cum-Chief Executive Officer with vacancy in Bank of Baroda due since August 1, 2014.

Data compiled by the Heavy Industry and Public Enterprises Ministry show that 182 CPSEs (out of 234 operating CPSEs) have a vacancy of 530 independent directors. This includes both listed and non-listed entities. A study by Prime Data Base (the agency which tracks composition of board of all the listed companies) revealed that among the listed 50 CPSEs, 38 are having either less than required number or are without any independent director.

An independent director (also known as outside or non-official director) is a member of a board of directors of a company, who does not have a material or pecuniary relationship with the company or related persons, except sitting fees. Independent directors do not own shares in the company. The role of such director is critical from the point of view of corporate governance.

Continuous process

Pranav Haldea, Managing Director, Prime Database, said that the appointment of independent directors in PSUs has to go through a long process via respective ministries. However, that is no excuse to have vacancies for over a year. “On the other hand, I believe that government-owned companies should be at the forefront of compliance and good corporate governance and show the way to private sector companies,” he said.

Though the government maintained that filling up of vacancies which arise due to completion of normal tenure of three years, resignation/removal of non-official directors, etc., is a continuous process, but a former senior Cabinet Minister in the previous Government claimed that not only any independent director has been appointed during last 14 months, but also those appointed earlier were forced to resign.

While rejecting this, the Heavy Industry and Public Enterprises ministry admitted that vacancy is large.

Three types

Every CPSE board has three types of director – functional, Government and Independent. The proposals for appointment of independent directors are initiated by the Administrative Ministries/Departments concerned by recommending names of at least three eligible persons for each position proposed to be filled.

A search committee, consisting of Secretary (DoPT) as chairperson, Secretary (DPE), Secretary of the administrative Ministry/Department of the CPSE and 2 non-official Members, forward the name to Appointment Committee of Cabinet (ACC) for final approval.

Banks wait for CEOs

Meanwhile, the wait for Managing Director-cum-Chief Executive Officer in seven state-run banks is getting longer.

Apart from Bank of Baroda, Bank of India (since June 1, 2015), Canara (since October 1, 2014), Punjab National Bank (since October 28, 2014), IDBI Bank (since July 1, 2015), Indian Bank (since June 10, 2015) and Andhra Bank (since May 1, 2015) are working with part-time MD & CEO. Now, the government says that selection process is at advanced stage.

Published on August 09, 2015
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