SEBI wants more independent directors on company boards
09 Apr 2008
Mumbai: The Securities Exchange Board of India (SEBI) has raised the number of independent directors for listed companies to one-half of the board in case the chairman is non-executive but is also either a promoter or related to those in the management.
The market regulator has tightened the corporate governance norms by modifying clause 49 of the listing agreement, which is in force since 1 January 2006.
The current regulation requires at least one-third of the board to be filled with independent directors if the chairman is non-executive, but in case the chairman is executive the board has to have at least one half of it as independent directors.
The modification to the rules means that at least one-third of the board has to be independent directors in case the chairman is non-executive, but if this chairman is promoter or linked to promoter or those in the management positions, it should be at least one half.
The market regulator also made it mandatory for listed companies to make disclosures of relationships between directors.
''If the non-executive chairman is a promoter or is related to promoters or persons occupying management positions at the board level or at one level below the board, at least one-half of the board of the company should consist of independent directors,'' SEBI stipulated among mandatory provisions.
It is mandatory to disclose relationships between directors, which would be made in specified documents and filings to stock exchanges. Among other mandatory provisions, SEBI stipulated that the gap between resignation or removal of an independent director and appointment of another independent director in his place should not exceed 180 days and the minimum age for independent directors would be 21 years.
SEBI asked companies to ensure that the person who is being appointed as an independent director has the requisite qualifications and experience which would be of use to the company and which, in the opinion of the company, would enable him to contribute effectively to the company in his capacity as an independent director.
SEBI has the power to delist companies if they do not comply with clause 49.
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