India Inc hunts for independent directors

In case of a non-executive chairman, at least one-third of the board should comprise independent directors and in case of an executive chairman, at least half of board should comprise independent directors,’’ the listing norms say.

But what is worrying Corporate India is the lack of credible and talented independent directors. ‘‘It will be difficult to inculcate the concept of independent directors in family-managed companies. Many of them have got chartered accountants and lawyers close to them on the board who seldom look at shareholders’ interests,’’ said a Mumbai lawyer.

As the board of directors will be elected by the shareholders in AGMs and most of the big companies’ promoters holding more than 50 per cent, it will be difficult for so-called independent directors to function without a bias. ‘‘Looking at the high risk involved and low remunerations… this (directorship) is not worth it,’’ says M.L. Bhakta, an independent director on RIL board.

According to the norms, independent directors should not, besides receiving director’s remuneration, have any material pecuniary relationships or transactions with the company, its promoters, its senior management or its holding company. They should not be related to promoters or management at the board level. The independent directors should also not have a substantial shareholder of the company, i.e. owning 2 per cent or more of the block of voting shares.