NEW DELHI: The Securities and Exchange Board of India (Sebi) has asked Indian companies to work towards separating the roles of chairperson and managing director (MD) before April 22, adding that the deadline will not be extended further.
“Listed entities were initially required to separate the roles of chairperson and MD/CEO from April 1, 2020 onwards. However, based on industry representations, an additional time period of two years was given for compliance.
The regulation will now be applicable to the top 500 listed entities by market capitalization, with effect from April 1, 2022. As at the end of December 2020, only 53 per cent of the top 500 listed entities had complied with this provision. I urge the eligible listed entities to be prepared for this change in advance of the deadline,” said Sebi chairman Ajay Tyagi on Tuesday at CII’s Corporate Governance Summit.
He argued that the rule was aimed at improving corporate governance. “The objective is to provide a better and more balanced governance structure by enabling more effective supervision of the management. Separation of the roles will reduce excessive concentration of authority in a single individual,” he said.
Citing global examples, Tyagi added that other countries have also implemented a similar rule. “Globally too, the needle seems to be moving more towards the separation... In the UK and Australia, the debate has tilted in favour of separating the two posts. Germany and Netherlands have a two-tier board structure, separating the roles of board and management,” he said.