Sebi puts Murthy panel governance report on hold

Securities and Exchange Board of India (Sebi) has decided to keep recommendations of the Narayana Murthy Committee on Corporate Governance in abeyance.

The recommendations, which proposed to bring in some changes in the Clause 49 of the Listing Agreement that dealt with definition and scope of functioning of independent directors, were supposed to be rolled out on April 1.

Disclosing this, Sudev C Das, executive director of Sebi, serving on the 23- member committee, said the decision to put the recommendations on hold followed public opinion opposing the proposed changes.

Das said the committee was in the process of making some changes to the proposed amendments to Clause 49 in line with the public opinion and would come out with a fresh set of recommendations shortly.

The new changes, when it would be announced, would again invite public opinion before making it mandatory for the corporates to implement.

The new Clause 49 states that a person shall be eligible for office of non-executive director so long as the term of the office did not exceed nine years in three terms of three years each, running continuously. Currently, there is no restriction on the tenure of non-executive directors.

Industry debated the point saying that the outcome of the new clause could be that once the nine-year term was reached, likes of Rata Tata or Keshuv Mahindra who are non-executive directors of several group companies, cease being a director.

The amended Clause 49 also says if a holding company is required to have 50 per cent independent directors, the same requirement would have to be complied with by the subsidiary company irrespective of its size and nature of business.

Industry argued that there was no reason why an unlisted entity should have the same stringent rules regarding board composition as a listed firm.

Many subsidiaries are special purpose vehicles with little operational relevance, and it makes no sense to have half or one-third of the board consisting of independent directors.

The proposed amendment also says that at least one independent director on the board of the listed parent company serves as a director on each subsidiary's board.

The whistle blower policy (WBP) is proposed for all companies whose shares are traded on any of the recognised stock exchange.

The main purpose of the policy is to report unethical or improper practices by the company in order to protect the interest of the stakeholders.

In addition to N R Narayana Murthy, chairman, Infosys Technologies, the members of the committee are: Y H Malegam of S B Billimoria & Company; Ravi Narain, managing director, NSE; A C Muthiah, president, Ficci; R K Somany, president, Assocham; Anand Mahindra, president, CII; M K Doogar, representative, PHD Chamber of Commerce & Industry; V K Bansal, chairman, AMBI; S K Dhall, former president, Bengal Chamber of Commerce and Industry; Kamlesh S Vikamsey, member - central council, ICAI; Manoj Vaish, ED & CEO, BSE; R Gopalakrishnan, executive director, Tata Sons Ltd; A K Narayan, president, Tamilnadu Investors Association; Nitin Shingala, Investor Grievances Forum (IGF); Manubhai Shah, managing trustee, Consumer Education Research Centre; Sucheta Dalal, consulting editor, Financial Express; Onkar Goswami, chief economist, CII; Pavan Kumar Vijay, president, ICSI; Deepak M Satwalekar, MD & CEO, HDFC Standard Life Insurance; M K Chouhan, chairman, Mahendra & Young Knowledge Foundation; Sudev C Das, executive director, Sebi; R S Loona, executive director (legal) Sebi and Neelam Bhardwaj, member secretary, deputy general manager, Sebi.