In a significant move, markets watchdog SEBI on Tuesday decided to implement the requirement to separate the positions of chairperson and managing director of listed companies on a voluntary basis and not make it mandatory for now. 

The development also comes against the backdrop of Finance Minister Nirmala Sitharaman recently saying that the regulator should hear if Indian companies have a view on the matter even as she made it clear that she was not “giving a diktat”. 

The top-500 listed entities were required to split the roles of chairperson and managing director/chief executive officer before the April 2022 deadline. 

Sebi cited “rather unsatisfactory level of compliance achieved so far” as among the reasons for the latest decision, which came after its board meeting on Tuesday. 

Initially, the listed entities were required to separate the roles of chairperson and MD/CEO from April 1, 2020, onwards. However, based on industry representations, an additional time period of two years was given for compliance. 

“Considering rather unsatisfactory level of compliance achieved so far, with respect to this corporate governance reform, various representations received, constraints posed by the prevailing pandemic situation and with a view to enabling the companies to plan for a smoother transition, as a way forward, SEBI board, at this juncture, decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a voluntary basis,” it added.  

As the revised deadline for compliance is less than two months away, the SEBI said that on a review it was seen that the compliance level, which stood at 50.4 per cent among the top-500 listed companies as on September 2019 had progressed to only 54 per cent as on December 31, 2021.