Sri Lanka market regulator calls for separation of administrative roles
The Securities and Exchange Commission (SEC) of Sri Lanka is advocating the separation of chairperson and chief executive roles to discourage the concentration of power in one individual.
This division of responsibilities at the board of directors’ level of a company is expected to ensure a balance of power and authority.
It is also said to improve Sri Lanka’s ranking in the Doing Business index as pursued by the Ministry of Development Strategies and International Trade.
According to the voluntary code of best practice developed by the SEC in association with the Institute of Chartered Accountants of Sri Lanka, a chairperson is expected to be an independent, non-executive director who does not perform the role of a chief executive.
At present, there is no specific rule on the separation of the chairperson and chief executive positions.
Therefore, is observed that many listed companies have the same individual carrying out the roles of chairperson, chief executive and managing director.
The SEC has invited written comments relating to the matter from the public and stakeholders to be submitted by 19 August.
Meanwhile, an SEC analysis reveals that 83 percent of listed entities have segregated these roles, having an independent or non-executive director as chairperson.
It also confirms that the Principles of Corporate Governance of the OECD promote the separation of roles.
Jurisdictions such as Pakistan, Indonesia, Norway and the Netherlands require mandatory segregation of the above-mentioned roles.