Public sector companies have strongly opposed the Securities and Exchange Board of India’s (SEBI’s) reported proposal to separate the post of chairman from that of managing director/CEO.
“Separation of chairman and CEO’s posts carries the risk of creating two power centres within the same organisation, which might adversely affect productivity,” U.D. Choubey, director-general, Standing Conference of Public Enterprise (SCOPE) told Hindustan Times.
SCOPE is the apex body of central public sector undertakings in the country.
A SEBI-constituted committee is reported to be considering a proposal to separate the role of chairman and the managing director or the CEO of listed companies to prevent concentration of management powers with one individual.
This might lead to a major overhaul of the board structure in many listed companies. About 8,000 companies are listed in India, 44 being state-owned.
“The public sector companies in our country have been structured through a foolproof check- and-balance system of Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC), government audit and Committee of Public Undertakings of Parliament to keep them away from the hazards of abuse of power in the chairman and managing director,” Choubey said.
Bifurcation will dilute the planning and executive functions at the top level and curb the authority of the managing director, he said.
“Separating the two posts means re-defining the role and responsibility for both posts. In case the chairman is a part time incumbent, he or she many not be able to devote necessary time to achieve the set vision and mission,” Choubey said.
In countries such as the United Kingdom, the United States, and France, the role of the chairman is distinct from that of the CEO.