Asish K Bhattacharya’s article, “Independent directors: An inherently weak institution” (December 12), highlights how the imbroglio in the Tata group underlines the tenuous position of independent directors.
Current rules make it possible for promoters of companies to bring in “yes men” as independent directors. The moment such directors disagree with the stance of the promoters they are accused of working against the interests of the company and sought to be removed.
In the interest of better corporate governance practices and for safeguarding the interests of minority shareholders and other stakeholders, it is suggested that for listed companies and firms with borrowings in excess of a certain threshold, a pool of professionals be created by the Ministry of Corporate Affairs (MCA) from which such independent directors are selected. The pool of professionals could comprise people with experience of 10 or more years at senior positions in companies, banks, reputed accounting firms and other similar bodies. Selection of such directors should take place by a draw of lots by a designated committee of the MCA. These directors should be appointed for a term of three to five years during which it should not be possible to remove them other than in extraordinary circumstances.
Considering the inefficient use of funds of shareholders and lenders by the corporate sector that led to the build-up of non-performing assets of banks, it is imperative the MCA steps in to strengthen the institution of independent directors.
Srijit Basu, Gurgaon
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