It is voluntary to separate the posts of Chairman and Managing Director (MD) in listed companies, that’s not necessary. Market regulator SEBI made this clear on Tuesday. Let us tell you, the rule of separation of the post of chairman and MD was to be implemented from April 1, 2022. Till now only 54% of the top 500 companies had followed this rule. This rule was introduced to improve corporate governance.
According to the news, according to the rules set, the post of chairman was to be kept non-executive. At the same time, it was also decided that the chairman and the MD could not be close relatives. Not only this, there was also opposition to the implementation of these rules in Corporate India. With the new announcement of SEBI, now companies will be able to keep the post of Chairman and MD separately or together as per their wish.
CMD post in many companies
At present, many companies have merged the two positions as CMD (Chairman-cum-Managing Director), leading to some overlapping of board and management. This may lead to conflict of interest. In view of this, in May 2018, the regulator came up with the criteria to separate this post.
Finance Minister Nirmala Sitharaman gave a response
The Securities and Exchange Board of India (SEBI) clarified things regarding both the posts in a release after the meeting of the Board of Directors. Finance Minister Nirmala Sitharaman had said earlier this month that if Indian companies have any views on this matter, then the market regulator should look into it. However, she made it clear that she is not giving any instructions.