With the regulator making it mandatory for PSUs to have adequate number of independent directors for tapping the stock market, the govt is making the procedure of their appointment simpler and time-bound.

The Department of Public Enterprises (DPE) has not only defined the clear procedure for appointment of independent directors on the boards of PSUs, it expects different departments to complete the appointment formalities within a maximum period of six months.

At present, there is no time limit for these appointments and “sometimes it takes years,” DPE Secretary Bhaskar Chatterjee said.

He said the new guidelines for independent directors has been cleared by the Appointment Committee of the Cabinet.

As per the Clause 49 of the Listing Agreement, any listed firm must have at least half of its board constituted by independent directors or non-executive directors, if it is headed by an executive chairman.

In case the chairman is non-executive, the rules demand that at least one-third of the board should comprise independent directors.

According to the new guidelines, time limit has been set for each stage of clearance.

For instance, the administrative ministry of the concerned PSUs will be required to take a decision on the recommendations of the Search Committee within one month.

In case no decision is taken and placed before the ACC within one month by the administrative ministry, the Search Committee recommendation would be placed directly before ACC by the DPE.

Even when it has been made necessary for a PSU to have the required number of independent directors, the Comptroller and Auditor General (CAG) has found lapses on this count in the case of several listed state-owned firms.

“Out of 47 listed government companies, the boards of 17 companies like Indian Oil, BHEL and SAIL do not have the required number of independent directors,” said CAG report.

There are 246 Central Public Sector Enterprises in the country, as on March 2009.