Formal huddle for part-time Sebi board members

In a departure from normal practice, part-time members of the board of directors of the Securities and Exchange Board of India (Sebi) will have a separate meeting prior to the January 14 full-board convening. This is in line with the rules under the Companies Act of 2013, though the provision was not binding on the markets regulator.

According to sources, Sebi has written to all part-time members to conduct a separate meeting before the scheduled board meeting. At this meet, they may take up the board meeting agenda, too, and any other issue they deem fit.

The four part-time members are two secretaries to the central government, Shaktikanta Das (economic affairs) and Tapan Ray (corporate affairs). Also, Reserve Bank of India (RBI) Deputy Governor N S Vishwanathan, and a senior advocate and Bharatiya Janata Party member, Arun Sathe.

The said provisions are in line with the Companies (Appointment and Qualification of Directors) Rules, effective since 2014. These prescribe a separate meeting of independent directors. Section 149 says every independent director (ID) shall be at the first meeting of the board in every financial year. The Act's provisions do not apply to institutions such as Sebi; however, aver experts, such a practice would improve corporate governance and transparency at the regulator. And, set an example for companies which are yet to adhere the prescribed rules.

“In the current scenario, it is important to put systems in place. The separate meeting was proposed in Sebi’s previous board meeting on September 23, where all the members agreed upon the decisions,” said part-time member Sathe.

Others say having such a practice would help in a crisis. “Discussing and sharing IDs’ views outside the formal settings of a boardroom perhaps result in nothing. It will be tested only when there is really a crisis in the system,” said Shriram Subramanian, founder and managing director, InGovern Research Service, a corporate governance advisory.

It might, he added, give leeway for IDs to apply their mind and articulate their thoughts while discharging their duties. The relevance of IDs has gained significance in the wake of allegations of corporate governance failure at Tata Group companies by former Tata Sons chairman Cyrus Mistry. The issue escalated when Nusli Wadia was voted out of Tata Motors as an ID, before his tenure ended.

“There are lots of debates taking place, from the role of an ID to their removal, but no say on what is appropriate. The entire set of corporate governance issues are multifaceted and has to evolve,\" Subramanian added.