[ By Bobby Anthony ]Securities & Exchange Board of India (SEBI) rules which come into effect on April 1, 2020, could stop Rishad Premji from continuing as Wipro’s chairman in an executive role.According to SEBI’s guidelines which are expected to come into effect, the positions of chairman and CEO or managing director in the top 500 listed companies would have to be effectively...
Securities & Exchange Board of India (SEBI) rules which come into effect on April 1, 2020, could stop Rishad Premji from continuing as Wipro’s chairman in an executive role.
According to SEBI’s guidelines which are expected to come into effect, the positions of chairman and CEO or managing director in the top 500 listed companies would have to be effectively segregated.
The SEBI has already communicated to Wipro that Rishad playing an executive role in the company despite being the chairman of the board would not meet the SEBI’s rule to segregate the roles of chairman and CEO “in letter and spirit”.
Once the SEBI new rules some into effect, it would be one of those rare instances where the promoter family plays no role in the day-to-day affairs running of the company, despite enjoying a 74% stake in it.
The new SEBI rule mandates that the chairperson of the board must be a non-executive director. It was first proposed in 2017 by SEBI’s committee on corporate governance, headed by leading banker Uday Kotak.
The basis of the new rule is to segregate the board of a listed company from its management. In 2018, Sebi made it a rule and gave top 500 listed companies by market capitalization two years to move to the new structure, which will be effective from April 1, 2020.
Earlier, Wipro had submitted a proposal to SEBI, seeking its permission to allow Rishad to continue in an executive role following a transition that was on expected lines and was set in motion after his father and former Wipro chairman Azim Premji stepped down from his executive role in 2019.
Significantly, in its annual report for fiscal 2019, Wipro had stated that when the SEBI regulation relating to appointment of non-executive chairman by listed entities comes into effect, “Rishad A Premji will cease to perform any executive role in the company and continue in the capacity of non-executive director of the company, such that the company remains compliant with the listing regulations in force at all times”.