Corporate governance a far cry? 106 vacancies in 32 PSUs for independent directors

PRIME Minister Narendra Modi might have been propagating the gospel of good governance through a slew of measures but as far as the functioning of the PSUs go, the NDA government has not appointed independent directors to a good number of PSUs ever since it came into power in May 2014. As many 106 independent directors have resigned or completed their terms in 32 companies since May 2014 but their posts remain vacant.

The absence of independent...

directors on PSU boards raises questions of corporate governance and poses a challenge for the government’s target of raising Rs 41,000 crore through minority stake sale in these companies.

Media reports quoting Prime Database figures say only BHEL appointed a new independent director during this period.

The 32 PSUs, including Maharatna PSUs ONGC, Coal India, IOC, NTPC and SAIL, have admitted in their compliance reports submitted to the National Stock Exchange that they have failed to comply with norms specified in the equity listing agreement for independent directors on their boards.

These blue chip companies added that the issue of vacancies has been taken up with the government and that the process of filling these vacancies was currently on at the ministry-level.

Thus, Coal India Limited, which does not have a single independent director on its board, said in its submission that “CIL has intimated the same to Ministry of Coal and they are in the process of making appointment”.

Admitting that its board faced a “shortfall of 7 independent directors”, SAIL stated that the “proposal for nomination of additional independent director(s) is under process by the Government of India, Ministry of Steel”.

As per new Sebi guidelines for listed companies, a board should have at least 50 per cent of directors as non-executive or independent directors with at least one woman director.

The Department of Disinvestment is already in the process of appointing merchant bankers for stake sale in 10 state-owned companies — Oil India, Container Corp, NMDC, MMTC, ITDC, NTPC, Engineers India, BEL, Nalco and Hindustan Copper.

In April, the government had tightened norms for the appointment of independent directors to raise the bar for corporate governance at state-owned banks and financial institutions.

These guidelines spelled out that an independent director should be at least a graduate with 20 years of relevant experience, and should not be an MP or an MLA, stock broker or anyone who has already served on the board of a bank or financial institution for six years.