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Independent directors in public sector undertakings (PSUs) may soon be appraised by the chairman-cum-managing directors (CMDs) concerned, if the new guidelines being formulated by the Ministry of Heavy Industries and Public Enterprises come into effect.
Expressing concern over the quality of directors on PSU boards, Mr Praful Patel, Minister for Heavy Industries and Public Sector Enterprises, said his Ministry was working on guidelines and one of the proposals under consideration is appraisals by CMDs.
“We want to have a qualitative assessment of the members who will be joining the board,” he told newspersons here on Wednesday after releasing the Public Enterprises Survey 2009-10. The Minister said that many PSU boards were being represented by those who had little or no domain expertise and did not contribute to the functioning of the company.
Mr Patel also said that there was an urgent need to fill the independent directors' vacancies for the PSUs to meet the Securities and Exchange Board of India (SEBI) requirements. SEBI norms prescribe for the company boards to mandatorily have 50 per cent representation by independent directors, if the chairman is executive. As of now, 25 PSUs, including blue-chip ones such as Indian Oil Corporation, ONGC, SAIL and BHEL, do not meet this requirement.
CVC clearance
On appointments of chairmen in PSUs, he said it is being proposed that the name would first have to be cleared by the Central Vigilance Commission before being forwarded to the Public Enterprises Selection Board. Besides, the succession plans for the PSUs should also be worked out in advance to bring about a qualitative change in the functioning of PSUs. Currently, CMDs posts of PSUs such as ONGC, MTNL, NALCO and Coal India are vacant.
In fact, to cut down on the long-drawn process for selection of CEOs/Directors, Dr U.D. Choubey, Director-General of Standing Conference on Public Enterprises, proposed a succession plan that would ensure completion of the selection process within three months. At present, 70 posts for CMDs and whole-time directors and 300 posts of independent directors are lying vacant.
On the strategic sale of sick PSUs, Mr Patel said the Government would have to take a “fundamental call” about chronic loss-making companies.
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