Independent directors on Central Public Sector Enterprises (CPSE) boards, for the time being, will not be able to evaluate the performance of the board and Government directors.
The Department of Public Enterprises has decided to keep this provision in abeyance for now.
"Since the Companies Bill 2011 has not been passed by both Houses of Parliament, there is a view that the two provisions should be deleted in the Model Role and Responsibilities for non-official directors of CPSEs for the time being," a senior Government official told Business Line.

ACTUAL REASON

Detailed guidelines on the functioning of non-official directors or independent directors were implemented last December. However, sources claimed that this was not the actual reason behind the move.
A number of CPSEs had raised their voice against these provisions. They felt that there were already agencies such as Central Vigilance Commission to look into such issues, so there was no need for evaluation by independent directors. Non-passage of the Companies Bill has just been used as a shield, sources added.
According to the existing norms, non-official directors of a company have to hold at least one meeting a year, without functional and Government directors and members of the management.
Now, the two provisions related to independent directors' powers have been taken off. One such provision says that the meeting of non-official directors will review the performance of functional and Government directors and the Board as a whole.

CODE FOR DIRECTORS

The second provision provided for a meeting to assess the quality, quantity and timeliness of flow of information between company managements and Boards. This was found to be necessary for the Board to effectively and reasonably perform its duties.
The official said once the Companies Bill is passed, this position will be reviewed. The proposed Bill details the code for independent directors and adherence to the given standards. These provisions are statutory in nature and will be applicable for both private and public sector companies.
According to the official, it would be desirable that the role and responsibilities to be framed for non-official directors should be broadly in line with the provisions contained in the draft Companies Act. The Lok Sabha has already approved the Bill, but it is still pending in Rajya Sabha.
The Government did list the Bill during the Budget session but failed to get it passed due to repeated adjournments.
shishir.sinha@thehindu.co.in
(This article was published on June 22, 2013)