Companies like Reliance Industries, Hindustan Unilever, TCS, Coal India and Bharti Airtel along with the remaining 291 listed companies will have to appoint a Non-Executive Chairperson on their boards by April 1, 2020, to comply with regulator SEBI’s new norms.
Currently, many companies have merged the two posts as CMD (chairman-cum-managing director), which often leads to some overlapping of the board and management and creates a conflict of interest. Now, as per SEBI’s directive, most of these firms would have to split the roles of chairman and managing director for compliance.
Further, companies like RIL, Bharti Airtel and TCS will also need to appoint a woman independent director on their respective boards by April 1, 2019.
These norms are part of the series of recommendations given by the SEBI-appointed Kotak committee on corporate governance.
As per the committees’ recommendation, a total of 291 companies (or 58.2 percent) out of top 500 NSE listed entities by market capitalization will have to appoint non-executive chairpersons, including by splitting the CEO/MD and chairperson position. (According to data provided by Prime Database and based on information available till July 18.)
The committee has also asked that 335 firms (33.5 percent) out of top 1,000 NSE listed entities by market capitalization should have one woman independent director by April 1, 2020.
Further, they have also recommended that the board should list the competencies/expertise that it believes its directors should possess and the ones the directors possess, in the annual report.
SEBI has also asked for a reduction in the limit of a maximum number of directorships (including alternate directorships) to 8 listed companies (of which independent directorships shall not exceed 7) by 1 April 2019 and no more than 7 listed companies by 1 April 2020. Also, payments made by listed companies to related parties with respect to brands usage/royalty which exceeds 2 percent of annual consolidated turnover, should have prior approval of shareholders.
Currently, 43 companies (4.3 percent) have 5 directors on their board, 12 companies (1.2 percent) have 4 directors and 1 company (0.1 percent) has 3 directors, as shared by Prime Database.
Some of the firms that need to increase the size of their boards are InterGlobe Aviation, which operates IndiGo airlines, Fortis Healthcare, Eicher Motors, Dish TV India and Monsanto India.