Sebi may limit independent director's capacity to five company boards

Sebi may limit independent director's capacity to five company boards
The market regulator seems to have learnt the lesson from NSEL scam as it now mulls the proposal of tightening the role of independent directors in companies by capping the number of boards they can serve in this capacity to five.

According to an Economic Times report, if the proposal move gets passed, a person may not be allowed to serve on the boards of more than five listed companies. The report said that the move could be aimed at strengthening the corporate governance, protecting minority investors.

The report also said the Sebi might restrict a whole-time director to act as independent director on the board of not more than two listed companies. Among other measures that Sebi plans, includes asking companies to appoint women directors.

However, these measures are likely to meet criticism from companies as HDFC Chairman Deepak Parekh said that there is already paucity of good directors and many existing listed companies, including Navratna companies, have not fulfilled the criteria laid down by Sebi on corporate governance.

ET report quoted Parekh as saying ""I feel five independent directorships is far too restrictive as independent directors also sit on subsidiary companies." However, Sebi feels that such restrictions will allow directors to spend enough time on analyzing board agenda and committee meetings at a company and prevent wrongdoing.

Dion Global Solutions Ltd.

Story first published: Friday, January 10, 2014, 9:12 [IST]
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