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Proxy advisory firm Institutional Investor Advisory Services (IiAS) has asked government-owned Coal India to appoint independent directors (IDs) and expand its board.
The company is in violation of Sebi’s listing agreement provisions, went an IiAS note. This is at a time when the government plans to sell a 10 per cent stake in the behemoth, as part of its disinvestment programme this year.
“Coal India’s current board comprises six directors, of which five are executive and one is non-executive. The non-executive director, Sujata Prasad, is the nominee of the Government of India. At a very basic level, the company is not compliant with the requirements of Clause 49 of the Listing Agreement. To comply, Coal India must appoint at least six IDs,” it said.
Coal India’s board of directors comprised 12 members till September 2014, when all six IDs resigned. Such vacancies are required to be filled in three months.
The lack of IDs mean Coal India was not being able to form the statutorily mandated board committees that must have an ID (audit committee, nomination and remuneration committee, and corporate social responsibility committee). Coal India also does not have a formal policy on familiarisation programmes for directors. IDs in public sector undertakings are formally appointed by the President of India and vetted by shareholders. Usually, these appointees are state sector employees or IAS officers. Coal India has applied to the ministry of coal for the appointment of IDs and awaits their response.
“The government must take its role as a promoter seriously and stop making board appointments a bureaucratic process or using them for politicking. The government needs to look at listed public sector units differently from its unlisted ones and accept that non-promoter shareholders also have rights and expect governance standards that are at least aligned to, if not better than, other listed companies,” the IiAS note added.
It says the government must allow professionals and non-government employees to enter the board. Shareholders must have the right to appoint IDs to state sector unit boards that are not or have been government employees.
