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Proposal to separate role of Chairman and Managing Director in PSU's  

Standing Conference of Public Enterprises (SCOPE) has opposed a reported proposal to separate the role of Chairman and Managing Director in listed entities. Any such decision should not be made in haste and should be arrived at only after detailed interaction with public sector enterprises (PSEs), the SCOPE Director-General, Dr U.D. Choubey, has said. A communiqué to this effect has also been sent to Mr. R. Bandyopadhyay, Secretary in the Ministry of Corporate Affairs, he said.

This move comes in the wake of a media report that SEBI's Primary Market Advisory Committee (PMAC) was considering a proposal to split the Chairman and Managing Director (read CEO) roles to ensure balance of power and corporate governance.“My view is that this (separation of Chairman and Managing Director) will have an adverse effect. The Indian management of corporate sector cannot be out rightly compared with western managements. We are not seamlessly similar to western management.

“Our systems are still personality driven and centralized around the CMD. Therefore if you create two power centres for running one corporate entity, it will have bad effect in decision making process,” Dr Choubey told Business Line here. The committee reportedly wants to prevent concentration of management powers in the hands of one individual and hence the proposal to split Chairman, Managing Director (CEO) roles. Currently, in most state-owned enterprises, there is only one post of Chairman and Managing Director and one person undertakes both the roles.

When pointed out that in developed countries such as the US, the UK and the France, the role of a Chairman is distinct from that of a CEO, Dr Choubey said that this should not be adopted in India just because the developed countries have done this.“We should not go with a superficial approach that this has happened in the UK and we should also do it. It requires deep research and good understanding of the Indian corporate system. We should not adopt this separation of posts without going into details,” he said.

Dr Choubey said that corporate governance in PSEs are much better than the private sector. He also pointed out that there are several checks and balances such as CAG, CVC audit, COPU to keep them away from hazards of abuse of power by the power centre in CMD.“If the CEO post is separated, then your vision and mission programme may not have the desired outcome. Your vision will be decided by a part-time non-executive Chairman. It is better to continue with the current arrangement of having a single person holding the post of a CMD,” he said.

SCOPE opposes separation of Chairman, MD role

by…….K.R.Srivats…..New Delhi, July 21…from the pages of THE HINDU BUSINESS LINE newspaper.

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