Create separate post of CEO in PSUs, says ONGC chairman

Oil and Natural Gas Corporation (ONGC) head R S Sharma has demanded the creation of a separate post of CEO in public sector companies to avoid a conflict of interest arising from the responsibility being vested with the chairman.

According to the corporate governance guidelines issued by the Ministry of Corporate Affairs, a committee comprising the majority of independent directors and the chairman is to determine the performance of “individual directors, as well as the board as a whole,” Sharma said. “In case the board is headed by the CEO (chairman also having the executive responsibility, as is the case in PSUs), a conflict of interest is inherent,” he wrote to the Public Enterprises Selection Board (PESB).

He suggested that the chairman should be non-executive or the role and offices of the chairman and CEO should be separated. Sharma also demanded that the number of independent directors on PSU boards be reduced to one-third, as the board becomes “too large to manage” if filled with 50 per cent independent directors.

According to Sebi guidelines, 50 per cent of the company’s board should consist of independent directors and the market regulator does not recognise government nominee directors on the PSU board as independent directors. “For compliance with Sebi guideline, the board becomes too large to manage. Too many opinions become cumbersome in the process of decision-making in the board meetings,” ONGC Chairman and Managing Director R S Sharma said.

“The situation is actually an overland for the board functioning,” he wrote.

ONGC has not been able to meet the guideline as the oil ministry has not cleared the names of independent directors to be appointed on its board for years. The company now wants the strength of independent directors in case of public sector units to be reduced from 50 per cent to one-third.