Quality norms for independent directors in PSUs soon: Patel

It is mandatory for a firm to have 50 per cent representation by independent directors on board.

The quality of independent directors in public sector companies needs to be upgraded and the government would soon come out with guidelines for the same,minister of heavy industries and public sector enterprises Praful Patel today said.

I want to make one categorical assertion that the quality of the members who are appointed on the boards as independent directors will have to be upgraded, Patel told reporters here after releasing the Public Enterprises Survey 2009-10.

He said the performance of the independent directors on PSU boards would be reviewed annually,and on an annual basis,we will have a qualitative assessment of such directors. The minister pointed out that many PSU boards are being represented by people who have no domain expertise or little expertise and do not contribute to the functioning the company. The Department of Public Enterprises will make some guidelines and make some assessment in consultation with our companies as to what is the contribution of the independent directors on boards and if need be we can suggest remedial measures, the minister said.

He also added that the post of independent directors will have to be filled immediately. As per the listing agreement of Sebi,it is mandatory for a firm to have 50 per cent representation by independent directors on board,if the chairman is executive,before getting listed on bourses. In case the chairman is non-executive,at least one-third of the board should comprise independent directors.

Recently,minister of state for heavy industries and public enterprises A Sai Prathap informed parliament that 25 PSUs,including blue-chip companies like Indian Oil,SAIL,ONGC and BHEL,are not compliant with SEBIs norms on the representation of independent directors on their boards. On selection process,Patel said a succession plan will be chalked out for filling vacancies in several PSUs including ONGC,MTNL,Nalco and Coal India. In the next 3-4 months we will come out with a very clear and easy to follow guidelines8230; Overall selection criteria is not the choice of the company8230;so first it has to be streamlined and if guidelines are crystal clear and easy to follow then we will be sure, he added.