ICAI hunts for skeletons in boards where independent directors quit

The sudden spate of independent directors quitting the boards of several listed companies following the Satyam Computer scam...

Written by JAYANT SINGH | New Delhi | Published: March 2, 2009 11:46 pm

The sudden spate of independent directors quitting the boards of several listed companies following the Satyam Computer scam has sent warning signals buzzing at the Institute of Chartered Accountants of India (ICAI). Sensing a possibility of numerous skeletons in the closet,the apex regulatory body for accounting and auditing professionals has started dispatching letters to those companies where such directors have quit over the past one-and-a-half months,notifying them that the Institute will soon initiate investigation into their balance sheets.

“There has to be something wrong if so many independent directors quit suddenly after the Satyam issue came to light. It’s for the best that we pre-empt the problem before another such case comes up,” ICAI president Uttam Prakash Agarwal told The Indian Express.

Over a hundred independent directors have quit over the last 2 months from the boards of various companies across the country. Data compiled from different sources,including the Bombay Stock Exchange,shows that about 120 independent directors from the boards of over a hundred listed firms have quit since January 7,the day B Ramalinga Raju,former chairman of Satyam Computer Services confessed to the Rs 7,000-crore fraud.

Some of the more popular names amongst the horde of independent directors quitting company boards are PRS Oberoi of the Oberoi Group,who resigned from the board of Jet Airways,NS Raghavan co-founder and former joint managing director of Infosys Technologies,who quit from the board of Bangalore-based Sobha Developers,DSP group chief Hemendra Kothari,who quit Ashok Piramal Group’s real estate firm Peninsula Land,Somasekhar Sundaresan of Delhi-based law firm J Sagar Associates,who resigned from Prime Focus,among several others.

The role of an independent director on a company’s board is supposed to be that of an impartial outsider who functions and questions the board’s decisions keeping in mind the interests of minority shareholders. The revelation made by Raju earlier this year had put the role and efficacy of independent directors in companies’ boards under intense scrutiny,questioning the degree of their involvement in the affairs of the companies they represent. There has also been speculation that most independents are just friends of the promoters who attend only a few board meetings every year and are largely unaware of the consequences of decisions being taken by the board.

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