As reported by Indianmandarins earlier, the Committee on Corporate Governance headed by Uday Kotak submitted its report to the SEBI on October 5. The report has called for overhauling the existing rules to strengthen the role of independent directors and bring more transparency to the functioning of boards. This assumes significance in the light of recent boardroom battles at Infosys. One of the key recommendations made by the committee is for an amendment to provide an enabling transparent framework to regulate the information rights of certain promoters and significant shareholders. In the Tata-Mistry battle, one of the allegations made by Tata Sons' former Chairman Cyrus Mistry was that a lot of sensitive information was shared by the company with Ratan Tata. While Tatas denied the allegation, the current rules prohibit any communication or procurement of unpublished price-sensitive information. The Committee observed that information sharing with promoters and significant shareholders occurs in the "shadows" in the absence of a channel legitimising such information flow. "The Committee members felt that the ground realities are at substantial variance from the legal framework... (the) regulatory framework should be amended... to reduce subjectivity and provide clarity for ease of business, along with appropriate... checks... to prevent any abuse...," the Committee report said. This provision may be kept optional, it added. The other key proposal is to separate the role of Chairperson and MD/CEO at listed entities with more than 40 percent public shareholding with effect from April 1, 2020. SEBI regulations do not mandate a separation of these posts. "The separation of powers of the chairperson (i.e. the leader of the board) and CEO/MD (i.e. the leader of the management) is seen to provide a better and more balanced governance structure by enabling better and more effective supervision of the management," the report said. After 2020, it added, SEBI may examine extending the requirement to all listed entities with effect from April 1, 2022. The has listed out a number of measures to strengthen the role of independent directors. One of the proposals is to keep out relatives of promoter group from occupying the independent director's place on the board. "Committee noted that there were some instances of persons who are relatives of promoters being appointed as independent directors. It was therefore concluded that the net of exclusions be appropriately expanded to avoid the appointment of family associates as independent directors," it said. The report has capped the remuneration of executive promoter director at Rs5 crore a year or 2.5 percent of net profit, whichever is higher. Overall, the salary of all executive promoter-directors at 5 percent of net profit. In both the cases, company needs to take shareholder approval through a special resolution. The committee noted various cases of disproportionate payments made to executive promoter directors as compared to other executive directors and felt that this issue should be subjected to greater shareholder scrutiny. On analysis of managerial remuneration based on the data available, the committee observed that certain non-executive directors (generally promoter directors) were receiving disproportionate remuneration from the total pool available as against other non-executive directors. If the salary paid to a single non-executive director exceeds 50 percent of the pool being distributed to the non-executive directors as a whole, then the company has to take shareholder approval with promoter getting the right to vote, it said.