Uday Kotak-led panel on corporate governance wants MD, CEO roles split; 6 independent directors on board

On October 5, 2017, Securities and Exchange Board of India (SEBI)-appointed panel on Corporate Governance submitted its recommendations.

About SEBI Panel on Corporate Governance:

The 25-member panel was set up by SEBI in June 2017. 

• The panel was led by Uday Kotak, the Executive Vice Chairman and Managing Director of Kotak Mahindra Bank.
• It also had bureaucrats, executives, lawyers and academicians as its members.

Important Recommendations of Uday Kotak –led panel on Corporate Governance:

• Separate Roles of Chairperson and MD/CEO: Listed companies with more than 40% public shareholding should separate the roles of chairperson and MD or CEO from April 1, 2020. Implementation of this decision in future could impact big companies such Reliance Industries, ONGC and Wipro, as they have same person occupying both posts.
• Strengthening Role of Directors: The panel has recommended that board of directors of the company must have at least six directors. This recommendation doubles the existing requirement of having minimum three directors under the Companies Act.
• Women Independent Director: As per current rules, Boards are required to have at least one woman director. The rule does not specify that she has to be an independent director. As per the recommendations of the panel, there should be an independent woman director in addition to the existing requirement.
• Audit of Subsidiary companies: In order to ensure more transparency, audit committee of parent company which has invested/lent Rs. 100 crore or more in a subsidiary/group company should review the books of accounts of the subsidiary/group company to check the use of funds.
• Other Recommendations: Companies should disclose key financial ratios in its annual report. It should release consolidated results every quarter. It should also release cash-flow statements every six months.