The regulator feels that holding two posts by members of the same family will lead to an overlapping of the board and management and conflict of interest
The Securities and Exchange Board of India (SEBI) may exclude family members, close relatives or related parties of the chairman of a listed company from becoming a managing director (MD) and vice versa, according to a report by the Business Standard.
On March 29, 2018, the SEBI-appointed Uday Kotak Committee had recommended splitting up the role of the chief executive officer, managing director and chairperson for the top 500 listed companies, from April 2020.
Several listed companies have merged the two posts and the regulator feels that holding of two posts by members of the same family will lead to an overlapping of the board and management and conflict of interest, the report suggests.
As per the report, marquee companies like Bajaj Auto, Godrej Industries, Apollo Enterprises, Adani Enterprises, Jaiprakash Associates and Jindal Stainless need to rejig their management and boardroom structures as family members occupy both positions.
SEBI is not in favour of concentrating power with one individual, especially when that individual is the promotor, a person familiar with the development told the newspaper. Apex industry bodies like the Confederation of Indian Industry (CII) had opposed the move in their feedback to the regulator in December 2018. They feel that the norms could be onerous and would not guarantee board leadership.The industry body feels the board is best placed to determine whether the chairman and MD should be the same person. However, it felt the move could help achieve a better and more balanced governance structure by enabling a more effective management supervision.