SEBI Makes Splitting CEO And Chairperson Roles Voluntary

Market regulator SEBI has made it voluntary for listed companies to separate the role of chairperson and managing director/chief executive officer.

Separation of roles was to become mandatory from April 1, 2022, for top 500 companies. But, in its board meeting on Tuesday, the Securities and Exchange Board of India cited various industry representations, highlighting the constraints posed by the prevailing pandemic situation to make the separation of roles requirement voluntary.

The decision is surprising since recently SEBI chairman Ajay Tyagi had dismissed the possibility of another extension, saying that sufficient time has already been given.

Data compiled by proxy advisory firm Institutional Investor Advisory Services showed that as of Oct. 30, 2021, among the Nifty 500 firms, 244 companies had still not complied with the role separation mandate. It includes prominent bluechip stocks like Reliance Industries Ltd., State Bank of India, Bharti Airtel Ltd., ONGC Ltd. and JSW Steel Ltd., among others.

In its board meet, SEBI noted the unsatisfactory level of compliance as well. As of Dec. 31, only 54% of the top 500 companies had complied with the requirement, it pointed out. SEBI cited "smoother transition" as the reason to make this change optional.

The proposal was first approved in 2018, basis the Kotak Committee's report.