With the J J Irani Committee on Company Law recommending that one-third of the board of a listed company should comprise independent directors, there will be a huge demand for independent directors.
What do independent directors do?
Independent directors are directors who apart from receiving director's remuneration do not have any other material or pecuniary relationship, or transactions with the company, its promoters, its management or its subsidiaries, which in the judgment of the board may affect the independent
Decision of the Directors
Independent directors are supposed to ensure good corporate governance. Their role is to provide unbiased and independent views to the board and represent shareholder's interest. But scams in companies, like Enron and WorldCom, have exposed the collusion of independent directors with the management, leading to a major crisis. So can there be better governance by increasing the number of independent directors? "Yes, over a period of time, it will ensure better corporate governance," says Vatsaraj.
The Sebi ruling
The Securities and Exchange Board of India, in the revised Clause 49 of the Listing Agreement, mandated that at least 50 per cent of the board of a listed company should comprise independent directors. The regulator had made it clear that Corporate India should comply with the revised Clause 49 by December 31, 2005 or face severe penalties.
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