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SEBI wants one woman independent director in top 500 listed companies. Is it feasible?

Companies may end up doing lip-service to ensure compliance

M Saraswathy | Mar 29, 2018 02:32 PM IST

The market regulator, SEBI, may want to promoter gender parity in India Inc. But is the reality a little different?

The Securities and Exchange Board of India (SEBI) in its board meeting yesterday decided that there should be at least one woman independent director in the top 500 listed entities by market capitalisation by April 1, 2019. Also, it added that there should be at least one woman director in the top 1,000 listed entities, by April 1, 2020. This was taking a recommendation of the Kotak Committee on Corporate Governance.

However, human resource experts are of the view that companies will only be doing lip-service to this requirement in the initial years, especially because of the lack of availability of qualified talent.

“Earlier, it was a formality and people would have their kin on their board. But they will need an independent person of a certain capability,” said Sunil Goel, Managing Director, GlobalHunt.

It is assumed that companies will need to appoint people who are not related to any officials of the firm and does not have any personal interests, investments in the company.

Rituparna Chakraborty, Executive Vice-President, TeamLease Services said that the underlying need was to ensure that organisations ensure diversity on the board and that is a journey.

“Those who didn’t have a diverse board will first look for women to simply fill the post. The intent is far more long-standing. But because there is a deadline that has been given to companies, it is likely that some companies simply look to ensure compliance of the guidelines,” she added.

Goel added that in the initial stages, there will be a demand-supply gap for companies because there will be multiple firms looking for the same kind of talent. Probably, at a later stage, there will better quality of women independent directors.

The Companies Act, 2013, says that one-third of the directors on board of every public-listed company must be independent directors. The Securities and Exchange Board of India (SEBI) norms also require the same of any listed company where the chairman of the board is a non-executive director. They can hold the position for five years.

Goel said that there will be an availability gap for women directors. Immediately if every company will need them, there will an increased demand. Purpose of appointing director is to have a neutral view. Once it is clear, it will better.