Indian market regulator Sebi's move to get listed Indian companies to include women on its board of directors has met with mixed results with most firms choosing to merely install women relatives on the board instead of making an effort to fill the posts on merit, thereby nullifying the purpose of the law.
But it now transpires that they may not have needed to even bother with that, because the penalty for non-compliance is laughably lenient.
Those who've failed to meet the regulator's ditkat, will face a four-stage penalty structure under which firms will be fined a paltry Rs 50,000 or Rs 1.42 lakh.
Here's how the fine structure stands:
Companies that comply between 1 April and 30 June will have to pay only Rs 50,000.
Companies that comply between 1 July and 30 September will need to pay Rs 50,000 and an additional Rs 1,000 per day till they ensure compliance.
Companies complying on or after 1 October will have to pay Rs 1.42 lakh, plus Rs 5,000 per day till the date of compliance.
And for this relatively easy let-off, private companies only have public companies to thank for Sebi's rap on the knuckles.
While Sebi preferred not to take names, it said that the fine had been kept small in order to take an 'accommodative stance ' towards companies who failed to meet to meet the requirement. The market regulator said that the decision was taken because many of the companies who are yet to comply were small ones.
However, although Sebi is not saying as much, a major factor may also be the fact that most of the biggest companies that haven't met the deadline are Public Sector Units.
As per data compiled by Prime Database, as many as 32 public sector firms have failed to comply and they include GAIL, ONGC, NTPC, SAIL, Punjab National Bank, Bharat Electronics, BPCL, Container Corp, Power Finance Corp and Rural Electrification Corporation.
Sebi has asked the stock exchanges to levy the fines as the violation relates to the Listing Agreement. As a result, fines will multiply for companies listed on multiple bourses.
As per estimates, over 1,000 companies on the BSE and 180 on NSE are in non-compliance of the rule, which was first announced by Sebi in February 2014 with an initial deadline of October 2014 and was later extended by six months.
For companies who appointed women directors on 1 April there's no relief. They will also face fines for failure to comply with the regulator's order.
The regulator had last year amended the provisions of Clause 49 of the Listing Agreement relating to Corporate Governance, mandating that the Board of Directors of listed entities should have an optimum combination of executive and non-executive directors with at least one woman director.
However, despite listed firms making a beeline to appoint women directors, the Director Identification Number (DIN) has been found to be missing for a number appointed women directors, while there are also instances of due process not being followed in calling a board meeting for such appointments.
Some companies had also written to Sebi and the exchanges about their 'inability' to meet the deadline, while citing reasons like 'lack of quorum' at their board meetings and sudden exit of their existing women directors. All of them would face penal action.
Nearly 500 companies announced such appointments in the last two days -- March 30 and March 31 -- while over 100 firms made such announcements on 1 April. Besides, close to 50 companies have announced the appointments after 1 April, although they have stated that the women directors were appointed with effect from 31 March or before.
with inputs from PTI
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Updated Date: Apr 09, 2015 11:32:07 IST