IRDA concerned over LIC governance
05 March 2012
The Insurance regulator has pointed out that all may not be well with corporate governance at India's biggest insurer, the Life Insurance Corporation (LIC), led by an acting chairman for the last nine months.
The Insurance Regulatory and Development Authority's (IRDA) is concerned about the insurer's government-appointed board which includes the chiefs of some state-owned financial institutions, The Economic Times said, citing people familiar with the thinking of the IRDA.
According the IRDA, the appointment of these CEOs as independent directors may not quite align with current corporate governance norms, despite the fact that such practices might have been in vogue for several years. The regulator has raised the issue with the finance ministry, though not formally, according to an official knowledgeable of the matter.
Analysts say the regulatory body's reservations may have something to do with the presence of the CEO of the state-owned General Insurance Corporation of India (GIC) and the chairman and managing director of Central Bank of India, a state run lender, on the board of LIC as independent directors.
The composition of the investment committee of LIC, which includes a government official, again raises issues of corporate governance, especially in the backdrop of the share sales of state-run companies such as Oil and Natural Gas Corporation (ONGC) where the issuer is the government, said this person.
The corporate governance issue comes at a time when the government is taking flak for a perceived attempt at nudging LIC to buy a large chunk of shares of ONGC, a state-owned exploration firm. The state run insurer had acquired shares worth close to RsRs6,000 crore towards the closing moments of a public auction held on 1 March, according to ET which cited two officials, helping the government raise a little over 12,000 crore.