India’s Reliance Industries has defended the appointment of Saudi Aramco’s chairman as an independent director on its board. The oil-to-telecom conglomerate insisted that the appointment of Yasir Al-Rumayyan has nothing to do with the Saudi firm’s plan to pick up a stake in its oil-to-chemicals business.
The appointment awaits shareholder approval and the voting process began on July 19 through postal ballot and will conclude on October 19.
Last week, the Calfornia State Teachers’ Retirement Fund, which owns 5.3 million shares in Reliance, decided to vote against the Aramco official’s appointment based on the recommendation by US proxy advisory research firm Glass Lewis. The fund noted that Al-Rumayyan has a key role in Aramco as chairman and is the governor of Public Investment Fund, the sovereign wealth fund of Saudi Arabia. Hence, the Cliforni body said, he does not qualify to be on the Reliance board.
The proxy advisory fund pointed out that under Indian law, an independent director cannot have a role in any company that has a business or equity partnership with the company that intends to appoint him or her. The Saudi Government sovereign fund already has a stake in Reliance’s retail and telecom units and hence Al-Rumayyan’s ‘independence’ is under question, it added.
On the other hand, Aramco has been in talks to pick up 20% stake in Reliance’s oil-to-chemical division for a valuation of $75 billion. The deal hit a roadblock due to the Covid-19 pandemic and a fall in crude prices. But with the current hardening of crude prices, the talks have gained momentum.
If the deal materializes, it will ensure a steady supply of oil to Reliance’s refineries. For the Saudi firm, this could mean more than doubling of refining capacity from the 3.6 million barrels a day to 8-10 million.
Reliance Industries has said this appointment was made based on the recommendation of the Human Resources, Nomination and Remuneration Committee. “Rumayyan satisfies all of these criteria laid down in the law and regulations. The committee of the Board of Directors consists of four independent directors out of the total strength of five,” the company said.
It also said that his appointment will help strengthen the board’s diversity and skill-sets and benefit Reliance through the transition from oil to chemicals and the aim to achieve net carbon zero by 2035.