Splitting Of Managing Director, CEO Posts In Listed Entities Not Mandatory: SEBI

Markets regulator Securities and Exchange Board of India (SEBI) on Tuesday said that the requirement to split chairperson and managing director (MD) and chief executive officer (CEO) positions at listed companies will not be mandatory and will be implemented on a voluntary basis.

The listed entities were required to split the roles before April 2022.

“SEBI board at this juncture decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a ‘voluntary basis',” the regulator said in a statement issued after its board meeting.

Earlier the market regulator had asked the top 500 listed companies to split the role of chairperson and MD or CEO before April 2022.

"Owing to rather unsatisfactory level of compliance achieved so far, with respect to this corporate governance reform, (and) various representations received, (as well as) constraints posed by the prevailing pandemic situation, and with a view to enabling the companies to plan for a smoother transition, as a way forward, SEBI board at this juncture decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a 'voluntary basis'," SEBI said in a statement.

The deadline for separating the roles of chairperson and MD has been extended multiple times. The SEBI had earlier set a deadline of April 1, 2020, which was later extended to April 1, 2022.

SEBI had set up a committee on corporate governance in June 2017 under the chairmanship of Uday Kotak with a view to seeking recommendations to further enhance the corporate governance norms for the listed companies.

This committee had suggested splitting the posts of MDs and CEOs as one of its recommendations on corporate governance.

The main rationale for the recommendation was that separation of powers of the chairperson and MD and CEO may provide a better and more balanced governance structure by enabling more effective and objective supervision of the management.