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Home / Opinion / NSE CEO exit: Examining Sebi, NSE board’s roles

National Stock Exchange of India Ltd (NSE) announced the sudden departure of its chief executive officer, Chitra Ramkrishna, last week. NSE’s version is that Ramkrishna put in her resignation because of personal reasons; the board merely accepted it. Three board members who did not want to be named concurred with this version.

Meanwhile, some current and former company executives say, again on the condition of anonymity, that this is a diluted version to make the parting look amicable. As several news reports have already said, Ramkrishna’s exit has to do with differences with NSE’s board of directors.

The moot question is if any of these differences have ramifications for policy making. If, as some reports suggest, the differences involved shortcomings on the governance front, should the Securities and Exchange Board of India (Sebi) take action or revisit some of its policies?

One major point of contention was the employment of Anand Subramanian, first as chief strategic advisor, and later as group operating officer. Subramanian was appointed effective 1 April, 2013, the same date Ramkrishna took over as chief executive officer from Ravi Narain. He left the organization in October this year, less than two months before Ramkrishna decided to step down.

Since Subramanian doesn’t have any prior financial markets experience, critics questioned his appointment and allegedly high remuneration. In defence, it is said that since he did not handle sensitive portfolios such as operations and surveillance, such experience wasn’t necessary.

Even so, a casual reading of NSE’s annual report suggests he was fairly high in the company’s hierarchy. And Sebi’s rules state that key management personnel need to be approved by the regulator as being “fit and proper" persons to hold such offices in exchanges and clearing corporations. NSE appears to have side-stepped this requirement by hiring Subramanian as a consultant. A defence some company executives have provided is that since he didn’t handle any of the departments which involve a regulatory role such as surveillance and listing, Sebi’s approval of his appointment wasn’t necessary.

In any case, such decisions are best left to the regulator. It’s unfortunate that Sebi didn’t raise a red flag on this after Subramanian’s promotion as group operating officer in April 2015. It’s best that the regulator closes loopholes, if any, which allow exchanges to hire key employees as consultants and avoid Sebi’s approval process.

From NSE’s perspective, if, as insiders say, the board disapproved of the appointment and the related high remuneration, then the assertion of its independence from the management is to be lauded. The NSE management has enjoyed enormous clout in the past, which, some experts say, led to such out-of-the-ordinary decisions. An independent board that keeps a check is always welcome. Of course, as the saying goes, one swallow does not a summer make. It’s best to wait and see how things progress on this front.

In fact, in this regard, it will be important to note what the board decides after the third party audit of the exchange’s co-location facilities. Sebi has asked the exchange to appoint a third party auditor to find if some trading members got preferential access to the company’s systems by colluding with NSE staff. One concern expressed by a Sebi sub-committee is that NSE’s top management didn’t cooperate during its investigation, leading to a concern about an attempt to cover up.

This column pointed out earlier that asking the exchange to appoint a third party auditor is akin to asking the exchange to investigate itself. But now, an independent board may be open to revealing findings that potentially go against the erstwhile management.

Another area where the board didn’t see eye-to-eye with the previous management was the listing of exchanges. Under Ramkrishna, NSE went to great lengths to postpone a listing of its shares, earning the ire of shareholders. Some institutional investors got together and even contemplated legal action, with some in the group saying publicly that the company had poor corporate governance standards. NSE’s current board of directors has taken a far more accommodative stand with respect to the listing, with chairman Ashok Chawla saying in an interview that a restructuring of NSE would be considered post-listing, if at all. Earlier, the proposed restructuring of NSE’s businesses was seen as a possible reason for a further delay in the initial public offering (IPO).

While critics of the former chief executive officer point to a laundry list of wrongdoings, the board of directors has taken a far more dignified approach. Even off the record, they are sticking to the official version of how events unfolded. This is far removed from the childish bickering in the Tata Sons Ltd episode, and is heartening.

Jayshree P. Upadhyay contributed to this column.

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