Top corporates gear up to split CMD post

Large corporates like Hindustan Unilever (HUL) and Reliance Industries (RIL) have started making arrangements to comply with regulator Sebi’s directive to split the roles of chairman and managing director by April 1, 2020, but several smaller companies are still giving their CMDs tenures beyond the deadline.

As the season of AGMs continues, many companies have sought shareholders’ approval for extending tenure of their CMDs, which in several cases will fall foul of Sebi’s guidelines for the top 500 listed companies in the country to have a non-executive chairman and a separate person as CEO or managing director from April, 2020. According to officials, Sebi is keen to extend this requirement to all listed companies eventually. For now, it is keeping aneyeontop500 firms which are appointing CMDs beyond the given deadline and will start sending them notices a few months in advance.

The defaulters would face strict penal action which may include barring the concerned chairmen or MDs from holding any board position, officials added. The companies that have proposed to extend the tenure of their CMDs beyond this deadline include PTC India, whose promoters include a clutch of power sector PSUs, and firms such as PVR, JBM Auto, Gujarat Ambuja Exports and Deepak Fertilisers, as per their respective regulatory filings. It could not be immediately ascertained whether all of them belong to the top-500 club.

Currently, many firms have the two posts merged as CMD, leading to some overlapping of the board and management, which regulators and experts feel could lead to conflict of interest.PTC India has reappointed Deepak Amitabh as CMD “with effect from October 16, 2018 till he reaches the age of 62 years — up to October 8, 2022”. PVR has also extended the tenure of Ajay Bijli as its CMD and JBM Auto too extended the tenure of its CMD Surendra Kumar Arya for five years.

Gujarat Ambuja Exports has reappointed Manish Gupta as its CMD “with effect from December 28, 2018 upto December 27, 2023”. Besides, Deepak Fertlisers & Petrochemicals Corp has extended the tenure of SC Mehta for five years.

According to a report by Prime Database, a total of 291 firms (or 58.2 per cent) out of top 500 NSE listed entities by market capitalisation will have to appoint non-executive chairpersons, including by splitting the CEO/MD and chairperson position. The data was prepared based on information available till July 18.