Non-compliance of LODR norms is common among PSUs. Several of them have failed to appoint women directors or have the requisite number of independent directors on their boards.
While the stock exchanges and Sebi can take strict action against listed firms in the private space, regulating PSUs in such matters becomes a contentious issue as their promoter is the government of India. “It is difficult to implement the new governance norms for state-owned entities since there is a wide gap in administrative procedures between the public and private sector companies,” said a company secretary.
Sebi’s standard operating procedures say any company violating the corporate governance
rules for more than two successive quarters and not paying the fine should be shifted to the trade-to-trade category. ONGC earlier faced the heat for having less than 50 per cent of the board of directors as non-executive directors, not reviewing performance of independent directors, and so on. The NSE had then levied a penalty of Rs 1,30,000 on the gas explorer.
“I have always said PSUs should be exempted. These are not board-run but ministry-run companies.
All directors are appointed by the government. Independent directors are not independent as they too are appointed/nominated by the promoter, in this case the government. Many PSUs continue to be non-compliant on, say, the number of independent directors or woman directors, but for no fault of theirs. The market also recognises this reality. An argument in their favour is that they are subjected to additional oversight by the Comptroller and Auditor General and Parliament,” said Prithvi Haldea, founder, Prime Database.