New Delhi, Apr 8: Assocham has suggested market regulator Securities and Exchange Board of India (SEBI) to accept nominees of Directors of Financial Institutions as Independent Directors in corporate's board.
The chamber pointed out that SEBI's proposal to stipulate nominee Directors as not Independent Directors (IDs) is contrary to the existing provision in Clause 49 of the listing agreement, treating institutional nominees as IDs.
''The nominee directors of FIs should not be deprived of their privilege in being IDs in corporate boards as they better represent their institutional interests in corporate boards and therefore denying them would be highly unfair,'' Assocham President Venugopal Dhoot said in a representation sent to SEBI Chairman M Damodaran.
The chamber further pointed out with the experience in and exposure to like situations in industry, nominee Directors of FIs (who generally hold good academic and professional qualifications) merit better consideration for treatment as IDs.
Representing FIs, they can better persuade a Board to adopt or not to adopt a decision in the best interests of the company and all its stakeholders, it added.
The chamber opined that the nominee of FIs are accountable to the FIs who nominate them, which would certainly make them discharge their responsibilities better than in the case of IDs who do not have any such responsibility.
''A new provision is proposed to be added in SEBI's statute saying that if the non-executive Chairman is a promoter or is related to promoters or persons occupying management positions at Board level or at one level below the board, he would not be treated as IDs and the company in such a case would be required to have 50 per cent IDs on its board,'' the Chamber said.
It added the existing provision contained in Clause 49 of the subject provides that where the Chairman of the Board is a non-Executive Director, at least one third of the board should comprise IDs and in case he is an Executive Director, at least half of the Board should comprise of IDs.
It, however, pointed out it is the true that under the existing definition of IDs contained in Clause 49, a non-executive Chairman in the cases covered by the proposed would not be treated as ID.
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The chamber pointed out that SEBI's proposal to stipulate nominee Directors as not Independent Directors (IDs) is contrary to the existing provision in Clause 49 of the listing agreement, treating institutional nominees as IDs.
''The nominee directors of FIs should not be deprived of their privilege in being IDs in corporate boards as they better represent their institutional interests in corporate boards and therefore denying them would be highly unfair,'' Assocham President Venugopal Dhoot said in a representation sent to SEBI Chairman M Damodaran.
The chamber further pointed out with the experience in and exposure to like situations in industry, nominee Directors of FIs (who generally hold good academic and professional qualifications) merit better consideration for treatment as IDs.
Representing FIs, they can better persuade a Board to adopt or not to adopt a decision in the best interests of the company and all its stakeholders, it added.
The chamber opined that the nominee of FIs are accountable to the FIs who nominate them, which would certainly make them discharge their responsibilities better than in the case of IDs who do not have any such responsibility.
''A new provision is proposed to be added in SEBI's statute saying that if the non-executive Chairman is a promoter or is related to promoters or persons occupying management positions at Board level or at one level below the board, he would not be treated as IDs and the company in such a case would be required to have 50 per cent IDs on its board,'' the Chamber said.
It added the existing provision contained in Clause 49 of the subject provides that where the Chairman of the Board is a non-Executive Director, at least one third of the board should comprise IDs and in case he is an Executive Director, at least half of the Board should comprise of IDs.
It, however, pointed out it is the true that under the existing definition of IDs contained in Clause 49, a non-executive Chairman in the cases covered by the proposed would not be treated as ID.
UNI
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