Companies will now have to explain why they do not have a woman director on their boards.
Companies should at least have one director, preferably independent, on board, according to SEBI’s Primary Market Advisory Committee (PMAC).
The move is to enrich the diversity of company boards, said sources close to the development.
PMAC has also decided to do away with the granting of employee stock options (ESOPs) to independent directors. Earlier, independent directors were eligible for ESOPs.
The committee has decided not to enforce the ESOP proposal through the listing agreement, as the New Companies Act does not permit it.
PMAC has also suggested that the Remuneration Committee of a company’s board should disclose the reasons for approving the remuneration of promoter-directors. Further, it suggested that a majority of the minority shareholders should also approve the compensation.
For companies with no identifiable promoters, a special resolution should be passed.
The Companies Act stipulates that independent directors who had served a company for over 15 years should not be considered independent.
The PMAC has agreed to align the maximum number of directorships that an individual can hold in listed companies at 10 with the Companies Act. However, there is talk that the PMAC is in favour of limiting it to five so that the directors can give quality time to each company.
The performance evaluation of independent directors, earlier optional, would now be mandatory and the criteria needs to be disclosed to shareholders in the annual reports.
Whistleblower policy
The panel has also recommended the extension of the whistleblower policy (meant for employees) to auditors and independent directors. Also, on the anvil, is a functional channel that enables auditors and independent directors to report suspicious transactions to the regulator.
It has also recommended rotation of auditors/ audit firm after 5/10 years.
Audit firms that have completed 10 years may receive a maximum extension of five years.
The panel is also in favour of making e-voting mandatory for all listed companies to pass resolutions. Presently, it is for the top 500 companies.
SEBI’s jurisdiction over unlisted companies (which was pointed out by the Supreme Court in the Sahara case) is understood to be in the discussion stage internally, while the issue of forward-looking statements of companies is yet to be taken up.