PRESS TRUST OF INDIA
New Delhi, 7 July
In a move to improve transparency and put in place stringent corporate governance norms for PSUs, the government is working on a proposal that would require independent directors to submit an "affidavit" stating they were not involved in any case of wrongdoing.
“There is a proposal that non-official directors have to provide an affidavit that they are not involved in any wrongdoing or fraud and comply with the laid-down corporate governance norms,” an official said.
At present, independent directors joining a Central public sector enterprise (CPSE) have to provide a simple declaration stating that they have not been involved in any fraud case.
The department of public enterprises (DPE) is in the process of preparing a Cabinet note which will be soon circulated for inter-ministerial consultations.
“We are in the process of preparing a Cabinet note in this regard which would be soon circulated to the concerned ministries/department for taking their views,” the official said.
Besides, an independent director has to ensure that he or she will not serve as an non-official director on the boards of more than three companies at any point of time, he said.
As per the Sebi guidelines, in case of companies with non-executive chairman, at least one-third of the board should comprise independent directors, and in case of companies with executive chairman, at least half of the board should comprise non-official directors.
Also, independent directors on PSU boards would no longer have a say in reviewing the performance of functional as well as government directors of the company. The move comes against the backdrop of concerns raised by various Central pubic sector enterprises and their administrative ministries in this regard.
“It was felt that there was no rationale behind a non-official director (NoD) reviewing the performance of a functional director as they were at similar positions,” an official said.
The DPE has received a number of references regarding the role and functions of independent directors which deal with separate meeting of independent directors.