NEW DELHI: The Securities and Exchange Board of India (Sebi) is expected to announce graded penalties for listed companies that fail to appoint women directors on their boards.
But, with public sector companies and banks being on the defaulter’s list, the market regulator is unlikely to crack the whip hard.
In any case, the failure of companies to comply with the new code is not just a non-compliance with Sebi’s norms but also a violation of the Companies Act, which first prescribed the rule. On its part, the market regulator had brought its guidelines on line with the Companies Act that governs unlisted entities as well.
Since the Companies Act allows companies up to one month to report change in directorship, the ministry of corporate affairs will wait at least till early next month before deciding the future course of action, said sources. Sebi may, however, announce its measures as early as this week with those companies that comply with the one-woman director norm earlier facing lower penalty. Companies Act also had a deadline till March 31 to comply with women director rule.
“Sebi can’t be seen to be allowing violation of it’s diktat but is finding it tough to initiate strict action given that public sector banks and companies have violated the norms in large numbers” said a source.
Experts, however, warned that stiff penalties may not be the best way to deal with the situation. ” It is a technical as well as social change. The idea is to get good people on the board, not necessarily the promoter’s wife. So, it needs, education, persuasion and coercion in right doses” said D K Mittal, who had redrafted the Companies Act during his stint as corporate affairs secretary. Mittal suggested that the regulators should extend the compliance deadline by three months or so.
As many as 12% or 180 of 1,456 companies listed on the National Stock exchange have failed to appoint a woman director on their boards within the stipulated March 31 deadline. Since April 2014, 1,832 women directors have been appointed on the boards of 872 companies. Of these companies only 43 had women directors prior to the Sebi rule.
But, there are notable exceptions in the public sector with several blue chip companies including NTPC and Bharat Petroleum not having a woman director on board. Thirty-one out of 68 listed PSUs have failed to comply with the guideline. Globally, there is a move to make boards more gender sensitive with countries such as Germany and the UK too prescribing similar rules.
The failure to appoint women directors comes despite a long deadline being given. In case of the government-run entities, Sebi is learnt to have taken up the issue repeatedly.
(The report first appeared with Times of India. We are sharing the same for readers )