MUMBAI, Feb. 15 (Xinhua) -- India's capital market regulator on Tuesday allowed companies to voluntarily opt to separate the chairman and managing director (MD) or chief executive officer (CEO) post.
In 2018, the Securities and Exchange Board of India (SEBI) had made it mandatory for the top 500 listed companies in India to separate the role of the chairman and MD/CEO, effective from April this year following an extension offered by the regulator in January 2020.
The regulator's objective was to implement the best global practices of governance and avoid the concentration of decision-making power in the hands of a single individual.
So far, only 54 percent of the top 500 companies had complied with this rule, as per the regulator's statement.
"Considering a rather unsatisfactory level of compliance achieved so far, with respect to this corporate governance reform, SEBI Board at this juncture, decided that this provision may not be retained as a mandatory requirement," the statement by the regulator said.
The regulator's decision to separate the two roles was based on the recommendation by a panel on corporate governance in 2017.
Commenting on the SEBI's decision, Makarand Joshi, founding partner at corporate compliance firm MMJC and Associates, said, "Existing corporate governance framework is very strong and day by day enforcement is also becoming stronger."
"Hence, separation of MD and Chairman position was not a very burning issue. Making it voluntary reflects that government is reciprocating to changes suggested by Industry," Joshi said. ■