Chairman and MD posts are separate in half of corporate India: Report

SEBI has mandated that both the roles be separated with effect from April 1, 2022 – after a two-year extension of the initial roll-out date. People holding the two positions cannot be related to each other.

On Tuesday, Sebi chief Ajay Tyagi indicated that the regulator is unlikely to extend the deadline again.

“We had given companies enough time to split post. I can ask companies to adhere to the deadline,” said Tyagi, who was interacting with reporters after the SEBI board meeting on Wednesday.

According to the IIAS report, 204 companies out of 244 companies that have complied with the rules so far have executive chairman. These are mostly family controlled companies and public sector undertakings (PSUs or state owned enterprises). The report said that out of 244 companies, 33 have a non-executive chairman who is related to the managing director.

“Among the remaining 7 companies, the non-executive chairman is not related to the managing director but is related to the executive vice president.2 Appointment of an executive vice president would allow companies to argue compliance with regulation, but was unlikely to have regulatory intent,” the report said. Having said.

The IIAS believes that companies may try to circumvent the rules on the definition of relatives.

“In another way those side-step regulation would be in correct reading of the definition of ‘relatives’ as defined under the Companies Act 2013. Given Indian family structures and relations, the set of relatives, in a practical sense, is spread out. Companies Act 2013 May not be as comprehensive and so may situations where extended family members preside over the board while promoters remain in their executive capacities. Depth of relationships is more important than distance, but it cannot be measured. Investors will have to live with it,” the report said.

In requiring the chairperson and CEO not to be related, SEBI rules are testing the succession planning of companies and forcing promoter families to make choices they may not be prepared for, the report said. .

“Nevertheless, it is needed from a market perspective, as almost two-thirds of corporate India is family-controlled, and succession planning remains a sensitive discussion. Despite succession planning becoming an essential part of the nomination and remuneration committee’s charter, it is often left to the patriarch or matriarch of the promoter family (albeit less frequently) to decide on succession. And often, the bloodline determines the succession rather than the skills and experience required to run the business in the future,” the report said.

For companies yet to comply with the rules, only a handful of boards, including Mahindra & Mahindra Ltd. and Wipro Ltd., have announced their plans to fulfill the new mandate. IaaS said most others continue to remain silent, upsetting investors, who prefer clarity and predictability on these issues.