Insurance behemoth Life Insurance Corporation (LIC) has now put in place a framework for appointment of Shareholders’ Director in its Board.
This framework — which has been introduced through a new regulation — comes eighteen months after the country’s largest life insurer came up with a mega Initial Public Offering (IPO) billed as the biggest float in the history of Indian primary market.
The issue was essentially an offer for sale of 22.13 crore shares equivalent to 3.5 per cent stake of the government and helped the Centre mop up ₹20,500 crore through this offering. The Centre currently holds 96.5 per cent stake in LIC.
Besides the Chairperson Siddhartha Mohanty, the LIC Board currently has four Managing Directors, nine independent directors and one Government nominee director MP Tangirala.
Appointment Process
The new framework provides that LIC shall elect — upon receiving a notice from not less than 1,000 shareholders or one-tenth of total number of shareholders, whichever is lower — a shareholders’ director through a general meeting of such shareholders, sources said.
A Shareholders’ Director would be appointed by the Board for four years and would be eligible for re-election and re-appointment for another four years, according to the new framework.
Interestingly, the new framework stipulates that a person to be appointed as shareholders’ director cannot hold a similar position in more than two body corporates at the same time.
Also, the second body/corporate in which he has been appointed should not be in a business that is competing or in conflict with the business of LIC.
The new framework provides that the shareholders’ director can also be considered as an independent director so long as certain conditions are met.
Also, a person elected as shareholders’ director would have to vacate his office on the day he ceases to be a shareholder, according to the new framework.
FIT AND PROPER CRITERIA
The Nomination and Remuneration Committee of the LIC Board has been tasked to carry out adequate due-diligence at the time of appointment or re-appointment as a shareholders’ director and for continuation as a shareholders’ director (annually).
Already the concept of shareholders’ director is prevalent in public sector banks.
Although the LIC IPO float — which was priced at ₹949 per share — was oversubscribed three times, the market price since then has consistently been below the IPO price, disappointing lakhs of retail investors. LIC policyholders had played a huge role in the success of the IPO.