Sri Lanka’s Securities and Exchange Commission (SEC) stressed the need to separate the Chairman and CEO of listed companies, as well as invite the public and all stakeholders to make written submissions on this step.
“Corporate governance best practice discourages the concentration of authority in one person. It is a clear norm that the Company’s Board of Directors’ (BOD) responsibilities should be divided, ensuring a power-and-authority balanced so that no one has unlimited decision-making powers. The Chairman is anticipated to be an autonomous Non-Executive Director as best practice and shall no longer serve the position of CEO, “said one individual in listed entities in a public consultative paper on’ Segregation of Chief Executive Officer and Chairman Role.’
At present, there are no particular rules concerning the separation of CEO and Chairman in accordance with the Colombo Stock Exchange (CSE) Listing Rules. The SEC notes in the lack of this rule that the Chairman and CEO of certain public enterprises (MD) is the same person as that of certain public enterprises.
Highlighting the justification for the introduction of the segregation of the CEOs and Chairman Roles, over a century ago, the document established the SEC in conjunction with the Sri Lankan Institute of Chartered Accountants (CA Sri Lanka), which calls for the segregation of chairman and CEO roles.
In addition, the SEC noted that in December 2017 CA Sri Lanka issued a revised code. In addition, for chosen organizations controlled by the respective authorities, the Central Bank of Sri Lanka (CBSL) has already complied with this requirement.
“The Organization for Economic Co-operation and Development’s (OECD-2015) Corporate Governance Principles also promote a division of the role of CEO and Chairperson that will help to enhance the performance of Board duties in Principle VI-Board Responsibilities in item E.”
“Many other jurisdictions, if they are not explanatory or voluntary compliance-based, have already adopted these values and have resolved the conflict through compulsory segregation. Legal authorities, like Pakistan, Indonesia, Norway, and the Netherlands, involve compulsory separation whereas jurisdictions like Australia, Singapore, and Malaysia either have to comply with or clarify why compliance is not complied with. The SEC called upon both the general public and all stakeholders, under the title of the’ Public Consultation on Segregation of CEOs and Chairman of the Role of One individual in listed entities’ to comment, on the document submitted by or before 19 August 2019, on or before the 19 August 2019.
The comment may be openly accessible and not handled as private, as set out in the consultation document unless there is a unique request.
