The Hindu Business Line : Corporate governance trust asks chambers to prepare list of independent directors

THE National Foundation for Corporation Governance (NFCG) on Wednesday asked the apex chambers and professional bodies to prepare a list of independent directors so that a database is ready by November 15 to enable India Inc for meeting the Securities and Exchange Board of India deadline of December 31.

From January 1, 2006, the revised Clause 49 regulations come into effect, which require companies to have specified number of independent directors on the company boards.

Addressing a roundtable organised by NFCG, a trust set up by the Ministry of Company Affairs in partnership with Confederation of Indian Industry, the Institute of Chartered Accountants of India and Institute of Company Secretaries of India, the Ministry of Company Affairs Secretary, Ms Komal Anand, said there is a need to create a database of such individuals, who could fulfil the criteria of becoming independent directors.

The Secretary stressed that the initiative was only to "catalyse" the preparatory phase towards creation of such a database. Describing the suggestion on corporation governance in the J.J. Irani Committee report on Company Law, as an enabling forwarding statement, Ms Anand said that the Government was working towards devising a revised Company's Act, to suit the new environment.

Talking about drawing up action plans for creating a database, Mr Y.S. Malik, Joint Secretary, Ministry of Company Affairs, pointed out that the concept of independent directors was here to stay, whether mandated or otherwise. He said that the concept of having independent directors on board was a step towards good corporate governance, even though there could be attached costs to it.

He estimated that the attached costs could be around Rs 2,000 crore, but added that the value addition would "significantly outstrip the costs."

He said that there is a requirement of 3,000 to 4,000 independent directors for about 6,000 companies, and asked the various industry bodies to draw up a list of such persons. Mr Malik also stated that the list prepared by the professional institutes and apex chambers could comprise non-members as well.

"Two separate lists of independent directors available can be prepared, one consisting of members and other of non-members," he said.

Stressing on the need for identifying persons with integrity, he said that the independent directors could be on board of five to six companies, but not of competitive companies.

In his remarks, Mr Adi Godrej, Chairman, CII National Council On Regulatory Framework and Corporate Governance, stressed the need to harmonise the differences between the SEBI clause 49 regulations and the recommendations by the J.J. Irani Comittee.

He suggested that there should be a clear direction to the industry to follow the number of independent directors to be inducted on the board.

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