One interesting aspect of the Satyam scam is that just by resigning from their positions, the so-called independent directors appear to have evaded legal liability for being sleeping partners in the running of the company. While one can understand their immunity where certain transactions took place without their knowledge, were they not responsible for approving the Annual Report and the balance sheets of the company over the years without bothering to raise any question or random-checking of facts? With some exceptions,they were also a party to the decision to acquire the companies of Ramalinga Raju’s sons which got cancelled later.
The acquiescence of independent directors in the actions of the Satyam chairman is understandable because of their obligation to him. This is because he is the one who appointed them. The directors in many of the rich companies get not thousands, but lakhs of rupees, going up to Rs 1 crore per annum, as sitting fees besides other direct and indirect benefits. One ‘independent’ director of Satyam is reported to have collected Rs 3 crore in the last few years as a consultant playing a double role like a film star! Thus there is a conflict of interest in the present selection procedure.
The power of appointments should be given to Sebi or some other independent body which is specially constituted for the said purpose. It will at least eliminate the independent directors’ sense of obligation to the company chairman. Secondly, they should be held responsible for approving matters coming to their notice in the Board meetings and face legal action in case of irregularities along with the chairman and other functionaries.
A Seshan, via email