Wednesday, 03 March 2021
The role of Independent Director (ID) as per SEBI seems to be that of a watchdog. The proposed changes has recommended changes to rules regarding eligibility criteria, appointment and removal, and the remuneration criteria.
We will not discuss the arbitrary decisions of SEBI or the role that they themselves play in overseeing of numerous frauds or then the various cases filed against them by shareholders in various High Courts.
Somehow, independence and freedom of speech are the topic of the day.
We have seen various banks/NBFC and public sector undertakings been run to the ground with hardly any action against the promoter directors or then the nominee directors. The idea of ring fencing the new breed of ID is therefore worth examining.
We must start by first identifying the companies that have failed the shareholders and bankers. These should be assessed for a genuine failure, as against a wilful failure. An investigation into the modus operandi of the wilful fraud should be undertaken. The failure of the various governance bodies should be assessed and action should be initiated within a defined time limit. Where are these statistics? Today we are scaring away genuine wealth creators and intellectual contributor. For every failed corporate there are multiple successful ventures.
Who are ID’s? They are mostly professionals with quality experience/ exposure. They are also attracted to reputed corporates and trusted promoter groups. The Corporates approach the ID’s after vetting their professional history and integrity. Once nominated they follow a process of approval by the shareholders.
We must learn to differentiate between ID’s and nominee directors. The later only follow instructions given by the parent organisations, like banks, parent company, etc. The ID needs to clear exams in addition to having relevant experience. They are expected to add value to the working of the corporate by sharing knowledge and experience. They are also expected to keep the board balanced so that the promoter group does not have a free run. So what happens when not all information or genuine information is shared with the board? Or then the ID’s do not speak their mind? Or then the ID is compromised? We need to have some basic data before painting everyone red.
Governance is about voicing the difference in understanding, not compromising, but understanding the ground realities, contributing positively to growth, not becoming a millstone. Independence in thought process and freedom of speech! Unfortunately, governance is today only about compliance. Most laws today hold the ID’s personally liable, exposing them to matters that they are remotely connected to. Their focus should be wealth creation not ‘babugiri’!
Board may want an academician on board with actual exposure to the industry, preferably with a global perspective. Technology is the driver, you may want to rope in a technology expert who could share his experience and challenges and guide the corporate through the journey. Where will you get them if the promoters do not scout for them, identify them and see if they are the perfect fit.
SEBI is electrifying the ring fence without identifying the vermin!
By- J S Jassal
