Independent directors serving on the boards of the nation's publicly listed companies are set to face a sharp cut in their perks, remuneration and fees. A wary government, still smarting under the alleged accounting fraud in Satyam Computer Services, is readying a host of proposals to ensure the directors truly live up to their independent role.
Under legislative proposals to amend corporate law, stock options will be ruled out for independent directors, who may also face a cap of Rs20,000 per meeting for each sitting in board meetings, government sources said. At present there is no cap and some directors earn as much as R30 lakh per annum
The proposals are being readied by the corporate affairs ministry, which is piloting the Companies Bill introduced in Parliament last year. A Parliamentary Standing Committee on the Bill submitted its report in August this year.
Government sources, who did not wish to be identified, said the ministry has decided to prohibit stock options for independent directors.
"The words — stock options — are proposed to be omitted from clause 132(6) of the Bill to allow independent directors to remain independent in decision-making," the source said.
The Bill, which is likely to be introduced in Parliament in the winter session with a slew of amendments as recommended by the Parliamentary panel, may have provisions to empower the Centre to prescribe sitting fees for independent directors.
"The rules may provide different slabs and categories for payment of sitting fees to different classes of companies on the basis of net worth or turnover," the source said.
The government has also proposed to set a six-year ceiling for any person to serve as independent director on a company's board and not more than two tenures in any case.
It has also proposed a cooling-off period of 3 years for an independent director to be re-inducted in a company.