CPSE boardrooms set for 200-strong 'independent' influx

Fri May 09 05:30:00 IST 2025

New Delhi: The government is looking to appoint as many as 208 independent directors urgently to the boards of central public sector enterprises (CPSEs) in one of the biggest drives to fill up vacancies, people aware of the details told ET. The tenure of eligible existing independent directors could also be extended, they added.

CPSEs have been grappling with an acute shortage of independent directors for months now. About 86% of non-official (independent) director positions at various CPSEs were vacant as of December 2024, having risen from about 59% two months earlier.

The shortage undermines independent scrutiny of corporate governance at CPSEs, experts said.

The Department of Public Enterprises has been in talks with the Department of Personnel and Training (DoPT), key CPSEs, and their administrative ministries or departments.

Listed CPSEs First
At least three meetings of a search committee, headed by the DoPT secretary, have been held since March to identify candidates quickly, the people said. "The idea is to fill vacancies at listed CPSEs first, and then move on to the unlisted ones," one of the people said.

India has 389 CPSEs, including subsidiaries, 70 of which are listed. The listed CPSEs account for almost a 10th of the total market capitalisation of BSE companies.

Under the Securities and Exchange Board of India (Sebi) Listing Obligations and Disclosure Requirements, at least one-third of a listed company's board members must be independent directors. They act as custodians of corporate governance standards and protectors of shareholder interest. The audit committees of companies, which oversee statutory compliances, comprise mostly independent directors.

Tenure & Process

Independent directors are usually appointed for three years, after which they can be granted an extension of three years. Beyond that, they can't serve on the board of the same CPSE.

Typically, proposals for the appointment of non-official directors at CPSEs are initiated by the relevant administrative ministries or departments. They are supposed to recommend at least three eligible persons for each position and the selection is made by the search committee under the DoPT secretary.

This committee also includes the secretaries of public enterprises and the administrative departments concerned. Based on its recommendations, the administrative departments concerned appoint the non-official directors.

Remuneration of independent directors at CPSEs, experts said, can vary according to the company's size and stature, just as in the case of non-state companies. According to rules, an independent director of a company-private or state run-is entitled to a sitting fee of up to Rs 1 lakh per meeting, reimbursement for participation and profit-related commission as approved by the board.

In the private sector, remuneration has gone up sharply in recent years. The median compensation for independent directors at Nifty 50 companies-excluding the state-run ones, banks and insurers-jumped to Rs 87 lakh in FY24, from Rs 42 lakh five years ago, according to an analysis by executive compensation advisory firm Exec-Rem Advisors.