Quality of board members crucial to corporate governance: Sebi chief

Quality of men on boards is crucial to corporate governance of a company. Hence, evaluation of board members should begin from the day one, said M Damodaran, chairman of the Securities and Exchange Board of India (Sebi) here on Saturday.

Delivering the keynote address at a seminar on 'Corporate governance in emerging markets', organised by the Centre for Analytical Finance of the Indian School of Business (ISB), Damodaran said the managements should find out, among other things, whether a member on the board was truly interested in the progress of the company.

Citing Clause 49 of the Sebi Act that regulates the conduct of a listed company, he said companies should implement the true spirit of corporate governance in their organisations through transparency, proper accounting and HR committees and not limit themselves to mere technicalities.

While suggesting good compensation for independent directors for their better performance, Damodaran, however, expressed himself against a longer tenure for board members as even the best men would lose value over a period of time.

T V Mohandas Pai, director (human resources) of Infosys, maintained that transparency in operations at all levels and provision of maximum information to shareholders would benefit the company in the long-run through improved confidence of people besides furthering the principles of corporate governance.

He, however, said the Western model of corporate governance "that makes people the centre of the corporate value system, could not be simply replicated in countries such as India."

"We have our own value system based on dharma and that should form the basis of corporate governance here," he added.

Rajanikant Patel, managing director and CEO of Bombay Stock Exchange, said minority shareholders as also institutional investors should use annual general meetings (AGMs) as an effective platform to force better corprorate governance practices on managements.

Sanjiv Bhasin, managing director of Rabo Bank, India, and Sanjay Nayar, CEO, Citigroup-India, acknowledged the role of institutional investors in making the owners and managements of companies sensitive to corporate governance issues.