Activist advisory firm Stakeholders Empowerment Services (SES) has once again raised questions on the credibility of two public sector units (PSUs) for not complying with the corporate governance laws.
The companies have not proposed the re-election of their Independent Directors.
SES, in its latest report on BHEL and PowerGrid, said the companies are not compliant with listing agreement/Department of Public Enterprises guidelines and Companies Act provisions relating to appointment of directors.
The Union Government being the promoter of the PSUs is allowed to nominate all directors on board.
However, companies should propose for the re-election of the board under Section 255 of the Companies Act.
SES was of the opinion that according to the Section 260 of Companies Act, the directors will cease to be on the board of these two companies if they are not re-elected in the forthcoming annual general meetings.
It also said that the representation of Independent Directors in the board is less than 27 per cent against the requirement of 50 per cent.
“We want the shareholders to come up with these issues during the annual general meetings. They feel that as the Government has appointed the directors, they are not liable for any re-election,” said Jitendra Nath Gupta, founder of SES and an ex-SEBI director.
The Independent Directors are on the board to block board resolutions, which may infringe upon the rights of minority shareholders.
By allowing the promoters to appoint Independent Directors, the oversight mechanism of the board may be compromised.