Wednesday, February 05, 2014

The easy route to crorepati status: independent director

We have a need breed of crorepatis in India: the members of the club of independent directors, Business Standard reports.

This club currently boasts of 15 members, including one ex-academic (Omkar Goswami), one retired bureaucrat (Vijay Kelkar) and several retired and present corporate executives. Goswami, the ex-academic, appears to top the list: he takes in a cool Rs 2.8 crore from his directorships. I am sure he must be the envy of the academic community.

What does it take to get into this club? Well, if you are a big name and have good connections in government or the corporate world, it certainly helps. Such people tend to belong to a closed club from which independent directors are chosen. You will not find a retired CGM of RBI or SBI, a college principleof repute or even several academics of stature in this club. The issue is not the ability to contribute in the board-room by enhancing the quality of discussions. The issue is your willingness to go along with management and your ability to contribute outside the board-room by, as they say, putting in a word where it matters.

One issue, which I have flagged repeatedly, is whether people who are paid enormous sums by the very people who bring them on board can be expected to act independently at all. Who would walk away from a fee plus commission of Rs one crore in order to speak his or her mind on the board? The issue is not just the amount that is paid. The issue is who does the selection. Management or the owner alone must not be allowed to select independent directors. Other stakeholders: minority and institutional shareholders and employees, for instance should be able to nominate independent directors. Then, the amount paid is not a problem.

1 comment:

Anonymous said...

It is all again talking about Governance issue. In a country, where there is still no split between Chairman of Board and MD of Company, how can one expect appointment process to be independent & objective.

I think the issue is relevant. But sorry to sound despondent, but I don't see any light at end of tunnel.