The Satyam episode shows that in spite of having high-profile names as independent directors and hiring one of the “big four” auditors, the worst kind of frauds are very much possible in the seemingly best companies. The reasons are obvious — the greed of promoters, ignorance or indifference of independent directors, sycophancy of top executives and perhaps the lack of fear of the law for auditors.
In spite of Clause 49 of Sebi’s listing agreement and the Narayana Murthy committee report, most Indian companies follow corporate governance rules only on paper. Most big companies prefer to flaunt high-profile names as independent directors. While many of these independent directors may be distinguished people in different fields (say, academic, law, public service or finance), they may not have sufficient knowledge on the running of companies, or for that matter, enough time to discharge their duties as directors properly.
The limit of 20 directorships in different companies also needs to be reduced. Many such directors turn professional independent directors. They get little time to focus properly on the issues of a particular company whose board they serve.
Also, independent directors need not necessarily be high-profile. They can simply be capable people with experience in corporate matters who can guard a company against corporate frauds, protect the interest of minority shareholders and be able to scrutinise transactions, authenticity of accounts and so on.
V Venkateswara Rao, Hyderabad