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CEO non-duality: Is it necessary in family business?

Family businesses contribute about 70% of India's GDP. It is obvious that family firms dominate the Indian corporate sector.

Topics
family-owned business | Corporate sector | Indian School of Business

Asish K Bhattacharyya 

Asish K Bhattacharyya

Beginning April 2020, the top 500-listed entities, of which around 60 per cent are family-owned companies, shall have to ensure CEO non-duality, that is, the positions of chairperson and CEO will be held by two different individuals. The chairperson shall be a non-executive director and not related to the CEO, according to the definition of the term ‘relative’ defined under the Companies Act 2013. The term relative is very widely defined in the Companies Act 2013. Members of the Hindu Undivided Family (HUF) are relatives of each other. Relatives of a person are: Spouse, father (including stepfather), mother (including stepmother), son (including stepson) and son’s wife, daughter and daughter’s husband, brother (including stepbrother) and sister (including stepsister). Family-owned companies are jittery about the proposal that the CEO and the chairperson should not be related to each other. We should evaluate the appropriateness of the regulation in the Indian context.

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First Published: Sun, December 15 2019. 21:06 IST
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