An advertisement by the Securities and Exchange Board of India (SEBI) seeking applications from for the post of two new executive directors (EDs) have stirred up discontent and raised issues about the practice of bringing in outsiders, either or contract or on deputation from other government services.
At inception, SEBI had no option but to bring in officials on deputation from various government cadres, since it needed persons with experience in investigation, enforcement, law and administration. Since SEBI quickly grew into a powerful regulator and offered better pay and perks, it because an attractive posting and career move for officers in government investigation services and for lawyers. Over the past decade, SEBI chairmen had begun to prefer EDs on contract, since they owed allegiance and loyalty only to the chairman. This raised a lot of concerns, especially, when it spliced to the legal departments.
Indeed, SEBI' employee service regulations also provide for the appointment of external candidates, but only when no suitable internal candidates are available. The advertisement suggests that SEBI is again looking for outside talent.
There are 10 posts of ED in SEBI, including one for full time chief vigilance officer (CVO). Over the years, sustained efforts by the employee association has brought some balance and ensured a few internal promotions to the post of ED as well as Whole Time Members (WTMs).
In a letter to SEBI chairman, the SEBI Employees Association (SEA), says, "While specialisation has been recognised till the level of chief general manager (CGM) in SEBI, unfortunately, at ED level, the regulations do not formally recognise this specialisation, in terms of qualifications or stream-wise specialisation. This, along with failure to recognise internal experience and expertise, could potentially lead to less than appropriate appointments."
The Schedule to Regulation 6(4)(b) restricts number of EDs to be appointed internally at 75%. This means, out of the 10, seven would be selected from SEBI's internal employees while three, including the CVO should be hired from outside. Earlier, this was 50:50, but current SEBI chairman Ajay Tyagi, to his credit, has ensured that ratio of internal to external candidates is 75:25.
However, at present, there are three ED in SEBI, who are outsiders. Out of these three outsiders, two are on deputation, while one is appointed on a contract basis. Those on deputation, include one from the income tax (I-T) department and the other, who is the CVO, belongs to Indian Ordinance Factory Services (IOFS). Terms for both these posts of ED are ending in October and November this year.
The EDs in SEBI at present are S Ravindran, Nagendraa Parakh, Amarjeet Singh, Anand R Baiwar, VS Sundaresan, SV Murali Dhar Rao, Sujit Prasad, and G Babita Rayudu. Arti Chhabra Srivastava from the IOFS cadre is the CVO of SEBI.
Interestingly, SEBI has a large pool of 30 CGMs, many of whom have spent almost 25 years with the market regulator. According to the employee association, their chance of promotion to the post of ED is likely to be impacted by looking for outsiders, when the need is to increase posts in line with the increased size and role of the organisation.
In the past there have also been instances of officials who came to SEBI on deputation as CGMs and were later elevated as ED. These include MS Ray, S Ramann and Gyan Bhushan, among others.
The SEA points out that in 2000, SEBI’s staff strength was 400 and there were seven posts of EDs. "Today, SEBI has a staff strength of around 900, and yet there are only nine EDs. Even the hierarchy above EDs has also expanded to four whole time members (TMs), when in 2000, there was not a single WTM in SEBI. This points to the need for rationalising the number of the ED post based on increase in positions both below and above ED level," it added.
"Before making any appointments of external candidates, availability of suitable internal candidates should be explored and only in case no internal candidates are found, should external appointments be considered," the SEBI Employees Association says, adding, "When considering internal candidates, the widest possible pool of eligible candidates should be considered so as to present the best possible internal options to the selection committee."
SEA says it is not opposed to external candidates per se. "But when experience shows that adequate number of suitable and well qualified internal candidates are available, as against non-availability of suitable external candidates, it is high time that this experience and reality was recognized and due recognition given to the expertise, experience, knowledge and long service of internal candidates," it added.