While keeping in focus the 2014 amendment of Clause 49 of the listing agreement by SEBI, critically examine the trend of political appointments as independent directors in PSUs in India.
Published: March 5, 2017
In India, members of a political party being appointed as an independent director of a company is a routine affair. Recently, names of 10 politicians have been cleared for appointing to positions as independent directors of various PSUs.
In 2014, SEBI introduced amendments to Clause 49 of the listing agreement for companies, according to which at least 50% of directors of the company should be non-executive or independent among which one should be a woman.
But appointing a politician who is involved in active politics as an independent director seems inconsistent. This move has many drawbacks. These political appointees may be used as a tool by the government to interfere in the workings of the PSUs. Second, a politician without required competence and experience cannot become an asset to the PSUs whose functioning is already in sorry state. For example, a politician with qualifications in mass communications has been appointed as an independent director of Engineers India Ltd.
The principle of meritocracy and professionalism has to be given preference while making appointments to the PSUs. Many PSUs are bleeding money, what they require is directors with expertise. There is no dearth for the availability of experts whose knowledge and skills can be utilised by the PSUs.
Model Questions Category: 058 - Indian Economy Issues Relating to Planning