SEBI Board on Tuesday decided that its earlier requirement of listed companies to have their post of Chairman and Managing Director mandatorily separated from April 1, 2022 would now only be a “voluntary” provision.

This decision, which came at a Board meeting in the capital, would come as a huge relief for Corporate India especially when only 54 per cent of the top 500 listed companies as on December 31, 2021 had complied to this requirement.

‘Unsatisfactory level of compliance’

SEBI attributed the rationale behind the latest decision to “unsatisfactory level of compliance achieved so far” with respect to this corporate governance reform and continued representation from industry bodies and corporates expressing various compelling reasons, difficulties and challenges for not being able to comply with this regulatory mandate. 

It maybe also recalled that Sanjiv Bajaj, CII President Designate and Chairman and Managing Director of Bajaj Finserv had recently at the CII Post budget meeting urged the Finance Minister Nirmala Sitharaman to “intervene” in the matter, which he described as “regulatory overreach” by SEBI that would create lot of problems for Corporate India.

SEBI had also amended its listing agreement to specify that from April 1 this year the post of Chairman and Managing Director should be separated and also that the Chairman should only hold a non-executive post and Chairman and Managing Director should not be related. 

SEBI had in March 2018 approved the proposal for separation of the role of Chairperson and MD/CEO of listed companies. In May 2018, the listing agreement was amended to introduce this governance norm with effect from April 1, 2020 for top 500 listed companies. The deadline was extended by two years in January 2020.

Prepare for turbulence: FM to SEBI

Meanwhile, in her customary post-budget address to SEBI Board in the capital, Finance Minister Nirmala Sitharaman on Tuesday asked market regulator SEBI to be prepared for a possible market turbulence on account of US Fed actions.

She urged SEBI — which is also regulator for commodity derivatives market—to take further steps to reduce compliance burden, reduce cost of market intermediation and take measures to develop the corporate bond market and develop green bond market in the context of increasing focus on ESG investment.

Sitharaman’s advice to SEBI to prepare for the likely market turbulence is significant as pressure is mounting on the US Fed to front-load more of its planned removal of accommodation given the recent surprise to the upside on inflation. 

The consumer price inflation for January in the US came in at 7.5 per cent. US is now seeing the highest inflation in the last forty years and this has prompted the equity markets there to tilt in expectations of a 0.5 percentage increase in interest rates by the US Fed at its March meeting.

The market is keenly observing how the US central bank will begin reducing its nearly $9 trillion in asset holdings, which had doubled during the coronavirus pandemic. 

The US Fed has already announced intent to buy $ 20 billion more of treasuries over the next month along with $28 billion in mortgage backed securities and close the programme in March. 

Stress on reforms

Meanwhile, Sitharaman during Tuesday’s interaction with SEBI Board members stressed the need for the regulator to initiate next generation of reforms to improve ease of doing business. 

The meeting with SEBI Board members was also attended by Bhagwat Kishanrao, Minister of State for Finance besides the top Secretaries and Chief Economic Advisor V Anantha Nageswaran.

The top secretaries who attended the meeting are T. V. Somanathan, Finance Secretary and Secretary (Expenditure), Ajay Seth, Secretary, Department of Economic Affairs, Tarun Bajaj, Secretary, Department of Revenue, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) and Rajesh Verma, Secretary, Ministry of Corporate Affairs.

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