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Letter to BS: Splitting CMD role to help improve corporate governance

This is a much needed reform in line with global practices

Business Standard  |  New Delhi 

Ajay Tyagi, Sebi Chief. Photo: Kamlesh Pednekar
Ajay Tyagi, Sebi Chief. Photo: Kamlesh Pednekar

This refers to the front page report “Breather for India Inc likely on CMD norm” by Shrimi Choudhary (January 9). The extension of the March 31 deadline by the Securities and Exchange Board of India (Sebi) may help the 247 top companies — including the big ones — identify suitable people for one of the two — chairman or managing director (MD)/chief executive officer (CEO) — roles but I do hope the “extension” is not a precursor to watering down the excellent proposal that promises to improve our corporate governance norms. There is, of course, the possibility that many corporations will only end up having merely titular/dummy and powerless nominees as chairmen and the MDs/CEOs will continue to exercise unfettered control with some "ineffective" independent directors on board. But even so, splitting the top two posts will do a lot of good.

Sebi Chairman Ajay Tyagi neither accepting nor denying the “possibility of considering a relaxation” creates the feeling that there could indeed be a relaxation of the good measure. The Uday Kotak Committee had made this suggestion — to separate the roles of chairperson and MD/CEO — to improve corporate governance in India, a much needed reform in line with global practices — and it would be useful to follow the same for the overall good of the Indian corporate sector.

Krishan Kalra Gurugram

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First Published: Thu, January 09 2020. 22:01 IST