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|Why questions being raised on independence of independent directors|
| Pavan Kumar Vijay |
New Delhi, Friday, May 19, 2017 | 20:32 IST
The Code for Independent Directors specified in Schedule IV of the Companies Act, 2013 lays down onerous role, functions and duties of Independent Directors. In fact, the whole edifice of good corporate governance is dependent on the efficacy and effectiveness of independent directors. However, concerns are being expressed time and again over their real independence and effectively discharging their duties, role and responsibilities.
When chairman of Satyam Computers, publicly admitted to cooking the company's books over several years, what shocked the investors the most was that none of the independent directors could spot the discrepancies in the books of the company. In the boardroom battle between Ratan Tata and Cyrus Mistry, some concerns relating to independent directors were raised.
And most recently, Infosys, which had been long considered the benchmark for good corporate governance practices in India, has seen its board come under attack. After these and more incidents like this, SEBI Chairman also expressed his views on the role of Independent directors "Auditors' committee is not working, independent directors are not independent and there is no stewardship code. This is a serious issue which is engaging the attention of SEBI. We will come out with more discussion soon".
Family owned business
For facilitating corporates to pick persons with the right skill set, there is need for a robust and reliable data base of persons available to take on the role. Unfortunately no such credible database is currently available and companies undertake their own search and diligence without being able to have an opportunity of access to a wide database to pick up persons as per company specific requirements. There is an urgent need to think of institutionalization of appointment of independent directors.
Need for training of directors
Need for structured agenda
The concept of structured agenda and uniform MIS is therefore, strongly advocated so that each director knows what and where to look at and the managements are not able to camouflage the information hiding essentials. Structured agenda and MIS will result in better and clearer understanding thereby ensuring effective participation with better results and less fear of going wrong.
Pavan Kumar Vijay is the founder of Corporate Professionals and is a fellow member of the Institute of Company Secretary in India
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