Cloud persists over number of independent directors

No consensus seems to be emerging on the appropriate number of independent directors needed on a company's board even as the government wants the industry to come up with suitable suggestions before deciding on the matter.

Company Affairs Minister Prem Chand Gupta today indicated that the ministry will take the industry's view before finalising the norm by the end of the next month. While the major industry chambers are divided on the numbers, Securities & Exchange Board of India (Sebi) has laid out norms that are perceived to be too strict."It is the corporate sector which has to decide,"

Gupta said at a seminar organised by industry chamber Ficci and Institute of Chartered Accountants of India (ICAI).The debate has turned into a number game with various limits being suggested.

While Sebi insists that companies should have 50 per cent independent directors in case the chairman is an executive and one third in case the chairman is non-executive, on their boards before December 31 as per clause 49, the Irani committee, constituted by the company affairs ministry, has suggested restricting their strength to one-third of the board's size.

While industry chanber Ficci too favours one-third strength, but Assocham has sought the strength of independent directors on a board to be restricted to 25 per cent. Experts are of the opinion that it would be difficult for a director to do justice to his duty if he took up directorship of more than 4-5 companies.

Ficci Senior Vice-President SK Poddar said, "The limit for a person to hold directorships of companies should be increased to 20 from 15."