No extension for PSEs to appoint independent directors

Listed public sector enterprises (PSEs) are unlikely to get an extension to comply with the requirements of Clause 49 for appointing independent directors.

"None of the PSEs has asked me for an extension", S Damodaran, chairman, securities & exchange board of India(Sebi) said. Damodaran expressed confidence that public sector enterprises would be able to meet the deadline for appointing independent directors.

An important issue which has still not been resolved is whether nominee directors appointed by any institution or government will be included in the definition of independent directors. This is relavent for both PSEs and private companies.

"While we feel that nominee directors can be independent directors, the JJ Irani Committee report has a different take. We are working with the ministry of company affairs to resolve the issue," Damodaran told Business Standard.

The standing conference of public enterprises (Scope) is preparing a database of recently retired chief executives of PSEs who can be independent directors in the PSEs. This is on the lines of database of independent directors being prepared by the industry chambers.

"We are sending the various ministries a list of 50 people. Another 50 names will be sent later," SM Dewan, director-general, SCOPE, said.

It is expected that the 40 listed PSEs would need anywhere between 120-150 independent directors. The appointments on the board of public sector enterprises are done by the various ministries governing the enterprise.

The Irani committee report on the new company law has said that nominee directors appointed by any institution or government appointees representing government shareholding should not be treated as independent directors.

The issue assumes importance as corporate India is filling up its board of directors with independent directors to make up the numbers as specified in the revised clause 49 of the listing agreement.

According to Sebi, there is no difference in the requirements pertaining to independent directors as specified in the listing agreement and as recommended by the Irani Committee.

Interpreting the report, Damodaran said 'Irani committee has said that a minimum of one third of the board should comprise of independent directors and it has also said that in certain cases regulators may specify requirement of independent directors.

So even if Irani committee's view is taken, Sebi can specify a higher level.' Sebi has specified that companies should have 50 per cent independent directors in case the chairman is an executive and one third in case the chairman is non-executive.