Damodaran clarifies on Sebi norms on directors

Sebi is unlikely to relax its norms on the appointment of independent directors in the listed firms if the government toes the line of the Irani Committee recommendations while amending the Companies Act this year.

Hoping that the government will not attempt to dilute a provision prescribed by a regulator, Sebi Chairman M Damodaran said the Irani Committee's recommendation was not inconsistent with the Sebi-mandated Clause-49 of listing agreement for listed companies.

"The Irani Committee has recommended a minimum one-third independent directors in a company's board. But the committee also recommended that for special category of companies, sectoral regulators can prescribe a higher limit," Sebi Chairman M Damodaran said here.

"I am concerned about the listed companies," he said indicating that listed companies will have to adhere to Clause 49 of listing agreement that mandates that 50 per cent of a listed company's board should consist of independent directors if the chairman is executive and one-third if it has a non-executive chairman.

Dismissing any tussle with the ministry of company affairs on the issue of appointment of independent directors, Damodaran said there would be no problem if a law was made mandating at least one-third independent directors in any company's board.

The proposed amendment in Companies Act is likely to provide for at least one-third independent directors in a companies board whether listed or unlisted.

MCA had sought views from from all stakeholders, including Sebi, on the compliance of Clause 49 by India Inc.

Damodaran said there has been a marked improvement in compliance in the last six months though it was not 100 per cent.

Sebi had set December 31, 2005 as the deadline for all the listed companies for complying with Clause-49, which is one way of improving corporate governance.