Barely three months after assuming office, the NDA government sacked four independent directors of the Indian Oil Corporation. In the next six months, more than 100 independent directors of public sector units (PSUs) were either removed by the government or they resigned. The government’s main constituent, the BJP, had been a vehement critic of the UPA government’s policy of appointing Congress faithfuls as independent directors of PSUs. The NDA government’s initial actions gave rise to hopes that it meant business about cleaning up the Augean stables of the PSUs. These hopes have been belied if the appointments, cleared last week by the Appointments Committee of the Cabinet (ACC), are any indication. The ACC has cleared the names of at least 10 politicians affiliated with the BJP for the posts of independent directors on the board of top PSUs.
According to the norms of the Securities and Exchange Board of India (SEBI), the boards of companies listed under it should have 50 per cent representation of independent directors, at least one of whom should be a woman. These directors have a non-executive role, but the main idea behind having independent directors on the boards of companies is not only to professionalise the top decision-making body within the firm, but also to supervise the working of the firms by unbiased professionals. The UPA government scarcely paid heed to this objective. Small-time politicians, retired bureaucrats, mediapersons, little-known chartered accountants and business people were appointed as independent directors. The NDA government has continued its predecessor’s practice of bestowing favour and patronage to a chosen few. Several of the appointees are women and it seems the government is on its way to fulfilling the requirement mandated by the SEBI.
However, the fact that such women are chosen by virtue of their association with the ruling party attenuates — if not defeats — the purpose of reserving an independent director’s post for a woman. It remains to be seen if the new appointees are able to add any value to the working of the companies they will be directing. But past experience does not offer much hope. For instance, in 2014, when the United Bank of India was stressed by the increase in non-performing assets, none of its independent directors — a politician, a media manager and a businessman — had any qualifications to help the ailing bank. Most of the new appointees will be taking up posts that had been vacant for more than a year — in many cases, even two years. On more than one occasion over the past year and a half, the SEBI had asked the government to fill up these posts. The professionalisation of the PSU boards demanded a robust selection process. It is unfortunate that the government has resorted to the hackneyed methods of past regimes.