Public sector companies are flouting SEBI regulations with impunity. Why should SEBI discriminate between PSUs and private sector companies on levying penalties for non-compliance?
The official website of the British Monarchy states that although civil and criminal proceedings cannot be taken against the Sovereign as a person under UK law, The Queen, the present Monarch, is careful to ensure that all her activities in her personal capacity are carried out in strict accordance with the law.
In fact, Queen’s daughter, Princess Ann faced court charges in March 2001, when she pleaded guilty to speeding while on her way to Hartpury College in Gloucestershire. She was fined £400 by the Cheltenham Magistrate’s Court and had five points added to her driving licence.
As per the reports, the following year, she became the first senior member of the Royal Family to have been convicted of an offence under the Dangerous Dogs Act, 1991. She pleaded guilty to the charge that her dog, Dotty, attached two children while she and her husband were walking the dog in Windsor Great Park. The Princess was fined £500 by Berkshire Magistrate’s Court and ordered to give Dotty more training.
Such is the level of compliance of law in United Kingdom. But in India, though we no longer have monarchy, it appears that the Government is above the law.
Women Directors on the Boards of Public Companies:
Last week, Finance Minister said that 1,707 listed companies, including public sector undertakings, do not have women directors. In a written reply to the Lok Sabha, he said that prosecution has been launched against 121 defaulting companies, other than public sector units (PSUs).
Market regulator Securities And Exchange Board Of India (SEBI) had prescribed fines on listed companies, other than PSUs, between Rs50,000 and Rs1.42 lakh depending on the period of default from 1st April to 30 September 2015. A daily fine of Rs5,000 is being imposed for continued violation after 1 October 2015.
It is not made clear as to why PSUs have not been imposed with the fine for non- compliance. On the contrary, SEBI had requested the government to advice the concerned administrative Ministries to take appropriate steps for ensuring compliance by defaulting listed PSUs, the Finance Minister said.
Why this discrimination between public and private sector companies in so far as compliance of legal requirements is not explained by SEBI, nor have they been exempted from compliance by SEBI so far.
1 in 4 listed PSUs do not have independent directors:
As many as 25% of the listed public sector companies have no independent directors on the board, according to the India Board Report 2015-16 published by Hunt Partners in association with AZB and Partners and PWC.
As per clause 49 of the listing agreement with stock exchanges, for a company with an Executive Chairman, at least 50% of the board members should comprise of independent directors. In the case of a company with a non-executive Chairman, at least one third should be independent directors.
These regulations are the result of SEBI’s decision to improve corporate governance in listed companies for protecting interest of minority shareholders. This is applicable for all listed companies but surprisingly a large number of public sector companies are yet to comply with these requirements.
SEBI should act without fear or favour:
It is a sad state of affairs. Instead of leading by example, public sector companies are at the forefront of non-compliance. This reflects badly on the Central Government who hold majority ownership of these companies.
Enforcing compliance of securities regulations is the primary job of SEBI and hence the responsibility for ensuring compliance lies squarely on the market regulator, who should have pulled up all those companies, who fail to comply with its own regulations without any fear or favour.
If Reserve Bank of India (RBI) can impose penalties on both private and public sector banks who fail to comply with banking regulations, there is no reason why SEBI should discriminate between public and private sector companies in so far as levying of penalties for non-compliance of securities regulations.
Can we expect the Central Government to hold all those responsible for non-compliance of its own rules and regulations in its own backyard first, before launching prosecution against the private sector companies for non-compliance?
(The author is a financial analyst, writing for Moneylife under the pen-name ‘Gurpur’.)