The Securities and Exchange Board of India (Sebi) is worried about the mass exodus by independent directors since the Satyam Computers scam in January.
The market regulator has sought the primary market advisory committee’s (PMAC) suggestions to rectify this situation.
On last count, already 364 independent directors had put in their papers, according to industry experts. When Business Standard contacted PMAC Chairman, Deepak Parekh, he was in South Africa and unavailable for comments.
Prithvi Haldea, chairman and managing director, Prime Database and a member of the PMAC board said, “Many independent directors are seriously worried. I have had calls from several of them wanting to know more details about their companies’ operations so that they can take any pre-emptive action, if required.”
Some other points that have been discussed, according to Sebi sources, include revising the way independent directors are appointed, tightening disclosure norms for companies to their independent directors and appointment of one-third of directors on every company’s board from a pool of independent directors created by the market regulator.
To create this pool of directors, it has been suggested that the market regulator trains professionals and gives a certificate that would allow them to sit on boards of companies.
More From This Section
If Sebi accepts some of these recommendations of PMAC, it will have to approach the Ministry of Corporate Affairs seeking a review of the Clause 49 of the Companies Act.
The accountability of independent directors came into question recently when Nimesh Kampani, who once used to serve as an independent director for Hyderabad-based Nagarjuna Finance, was brought under investigation for the firm’s failure to return about Rs 98.3 crore that was collected from depositors in 1997-98.
Sources said that since the independent directors are often given access only to limited information about the company, it may not be fully justified to hold these directors responsible when a fraud is discovered.
“Independent directors should not be held responsible for every malaise in a company. Often, they have no control or knowledge about it. However, the directors need to be accountable for decisions that they were a party to, with negligence being also treated as connivance,” added a market expert.