Calcutta, July 16: Listed companies may soon have to give detailed reasons for the resignation of their independent directors.
Addressing members of the Calcutta Chamber of Commerce, Sebi executive director Ananta Barua said the issue was under discussion with a committee set up by the market regulator to strengthen corporate governance.
The matter has come to the regulator's notice following instances of resignation of independent directors under the guise of "personal reasons", the details of which are not publicly available.
Flash data from the National Stock Exchange reveal that listed companies have seen 6,807 instances of cessation since 2006.
At present, there are 5,058 individuals holding 7,951 director posts across 1,638 listed companies on the National Stock Exchange.
"The question arises whether independent directors are really independent. It has come to our notice that in many cases if an independent director resigns, personal reasons are being given. Now, one of the things which is being debated is whether the independent director should give the detailed reasons (of resignation/cessation) to the stock exchanges," Barua said on Saturday.
Under present norms, an independent director may resign by sending a letter of resignation in writing to the company. If the letter is accepted by the board of directors, it has to be filed with the registrar of companies.
But it is not mandatory to disclose the details of the resignation/cessation with the stock exchanges.
Capital market regulator Sebi has set up a committee under the chairmanship of Udak Kotak to explore the issues related to the improvement of corporate governance with participation from stock exchanges, Sebi officials, professional bodies, investor groups, law firms, chamber of commerce, academicians and research professionals.
Some of the areas where the committee is expected to give its recommendations are: participation of independent directors in the functioning of the company, improving safeguards for related-party transactions, accounting and auditing practices, board evaluation, issues faced by investors in voting and participating in general meetings and issues related to disclosure and transparency.
The report is expected by September or October, following which the regulator may seek public comments.
While Barua did not specify a definite timeline, he said, "It (corporate governance) is high on our agenda".
Sebi chairman Ajay Tyagi has reportedly expressed concern over the lacunae in existing corporate governance practices and lack of details on the actual reasons for the resignation of independent directors.