MUMBAI, NOV 4: Independent directors (IDs) proposed to be appointed by corporates in line with the Securities and Exchange Board of India's guidelines are expected to face three kinds of liabilities, and the primary reasons for taking them to court can be scams or defaults and failure in meeting disclosure requirements by the companies they represent, according to a legal expert.However, the nominated directors have special rights to bask under and escape from many of the liabilities, he added. Common laws enjoin upon an ID to maintain minimum standards of professional integrity, while statutory liability deals with illegal breach of trust and failure in disclosure and under public welfare laws, he said.In the light of stringent legal implications on IDs, he advised the prospective IDs to accept limited number of assignments and go in for insurance coverage against exposure to legal claims, besides ensuring that the company follows time-tested transparency in disclosures and appointment of a default officer, who would be subjected to legal action in case of default by the company."IT is the responsibility of the CEO and the promoters of a company to do the right selection of independent directors and derive good advice from them, otherwise independent directors could well turn out to be more dependent than being independent," said Chairman and CEO, Infosys Technologies, Narayana Murthy."The main characteristic of an independent director should be clean functional expertise, and one should have gained respectability for the same," he said at the CII conference on independent directors.Speaking on the Infosys experience with the independent directors, he said three years ago, when Infosys hired independent directors, it looked at four criterion, which also included "their being physically fit and below 65 years of age and they should not have any long-term financial or material relationships with the company or its directors.""We don't want anybody who should be bodily lifted and brought into the boardroom and to be told in which city or town he is in," he said and added that a director of Infosys must be in a position to sit continuously for at least eight hours a day at a stretch in the meeting.He said he would never keep an ex-employee of Infosys as an independent director, because it would not be considered by anybody as an external talent being brought into the company. The role of independent directors and what the company expected out of them should be categorically specified and made sure that they would be in a position to spare the time required for fulfilling their brief was available with them, he added.Infosys sends a two-and-a-half page note to its directors specifying these things, apart from the remuneration, he said. For getting the best out of them, the company should provide unfettered access to accounts, auditors and officers, make them feel part of the company and involve them in all strategic decisions."At Infosys, all budgets (capital, revenues) are presented to the directors at the beginning of the year. Stock options are also approved based on the recommendations of these directors," he added. Independent directors play an important role in the company by acting as ombudsman, watchdog on costs and ensure fairness to all share and stake holders, he said.Infosys refers its acquisition plans, proposals for appointment of internal directors or auditors to independent directors, besides all strategic decisions, he added.
