LIC opposes Sebi move on directors

After the Reserve Bank of India, it is now the turn of Life Insurance Corporation (LIC) to oppose the move by the Securities and Exchange Board of India (Sebi) to treat the nominee directors of the companies as whole-time directors.

According to LIC, the nominee directors appointed by the financial institutions cannot be treated as whole-time directors since the nomination is based on the financial investments or equity stake in the companies and the nominee directors are not involved in the day-to-day operations of the company.

The Sebi is in the process of amending clause 49 of the SEBI Act to ensure better corporate governance norms.

LIC also said that the Sebi should lower the age limit for the company directors. This is to prevent the same directors from being appointed repeatedly in contravention of global corporate governance norms.

The RBI had also suggested that since the nominee directors in listed public sector banks are appointed by the government, they cannot be treated at par with the corporate whole-time directors.

Since the government is a sovereign body, it cannot be compared with private companies which appoint independent directors on their boards.

Moreover, such stipulations may not apply to banks which are guided by separate statutes such as the Banking Regulation Act, Nationalisation Act, SBI Act and the Companies Act, according to the RBI.

The Sebi's concern is valid as far as the private sector companies are concerned. There could be a conflict of interest in case of the private companies as the private individuals also control the board.

This is not the case with the government-appointed independent directors in banks and institutions.