No place for political nominees on PSU boards as independent directors

The government has stipulated stringent norms, as a result of which only persons with government experience, domain expertise, finance or academic backgrounds can join as IDs of PSUs

The government has now made it “practically impossible” for political appointees to find a place on the boards of public sector units (PSUs) as independent directors (IDs), a top official has said.

“Now, we have worked out a system by which it is practically impossible (for political nominees to join PSU boards as IDs),” secretary, department of public enterprises, Bhaskar Chatterjee told PTI.

He said that stringent norms have been stipulated, as a result of which only persons with government experience, domain expertise, finance or academic backgrounds can join as IDs of PSUs. “If you study the appointments of the past two years, you would not see a single case where a non-professional has been appointed as ID,” Mr Chatterjee said.

The presence of people (as IDs) with just political background has become “totally zero”, he said.

As per the norms, any unlisted company should have at least one-third of the directors on the board as ‘independent directors’.

A listed company headed by an executive chairman should have at least half of the directors as independent directors.

However, PSUs are facing shortages of IDs. “There is a shortage of more than 50% independent directors in the country,” said Mr Chatterjee.

As on March 2010, there are over 380 independent directors in PSUs, according to official estimates, Mr Chatterjee said. The department is “mulling changes” to reduce the time period for selection of IDs, he added.




7 years ago

The DPE laments that PSUs are short of 50% of the reqd Independent Directors.While it is welcome that political appointees without any relevant qualifications or background are precluded from joining PSUs, one would have thought that DPE would cast the net wide amongst the professional class both within Public and Pvt sectors. However DPE follows an archaic rule that only former CMDs from PSUs are considered for IDs when a large talent bank of former Executive Functional Directors of PSUs are available.This rule may have been relevant at one time but not when your current need for professionals is so high and this class of domain experts are already tried, tested and whetted by the DPE's own selection machinery! I am reminded of the hindi proverb," gharka murgi dal barabar"

Tobin-type tax on capital inflows not off the table: RBI

A Tobin Tax is a tax on foreign currency transactions to discourage destabilising short-term inflows of international capital into a country

The Reserve Bank of India (RBI) governor D Subbarao has said that India is not contemplating imposing a Tobin Tax on capital inflows, but did not rule out introducing it later, reports PTI.

“Depending on what flows come in, we would employ measures, including if necessary something like a Tobin Tax,” Mr Subbarao said in response to a question after giving a speech at the Peterson Institute for International Economics, a Washington-based think-tank.

“At the moment, we are not contemplating one and I do not believe there is a need for one, but it is not off the table,” Mr Subbarao told the US think-tank.

Earlier in his prepared remarks, the RBI governor said: “The surge in capital flows into some emerging market economies (EMEs) even as the crisis is not yet fully behind us has seen the return of the familiar question—the advisability of imposing a Tobin-type tax on capital flows.

“Both before and after the crisis, there are examples of countries, notably Chile, Colombia, Brazil, and Malaysia that have experimented with a Tobin Tax or its variant.

“Even as there are some lessons to be drawn from the country experience, on the aggregate, it does not constitute a sufficient body of knowledge for drawing definitive conclusions,” he said.

Critics of the Tobin Tax—a tax on foreign currency transactions to discourage destabilising short-term international capital into a country—contend that the tax is ineffective, difficult to implement, easy to evade, and that its costs far exceed the potential benefits, and all this because financial markets always outsmart policymakers, he said.

Supporters of the tax argue that if designed and implemented well, the tax can be effective in smoothing flows and that evading controls is not such a straightforward option as efforts to evade require incurring additional costs to move funds in and out of a country, which is precisely what the tax aims to achieve, he observed.

“In India, given the overall thrust of policy, we are quite agnostic on the choice of different instruments. The stereotype view is that we have an express preference for quantity-based controls over price-based controls,” Mr Subbarao said.

“A critical examination of our policy will show that this view is mistaken. For example, on bonds we impose both a limit on the amount foreigners can invest as well as a withholding tax. Similarly, our policy on external commercial borrowing employs both price and quantity variables,” he said.

“We have not so far imposed a Tobin-type tax nor are we contemplating one. However, it needs reiterating that no policy instrument is clearly off the table and our choice of instruments will be determined by the context,” the RBI governor said.


Buffett’s war

Warren Buffett’s investment group, Berkshire Hathaway, has been lobbying for a clause to exempt existing derivatives contracts from proposed rules that would force companies to put money aside to cover potential losses in a deal.

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