Law to steer independent directors
The government is set to scrutinise the role of independent directors in companies, now that the dust has settled around the Satyam saga that triggered new questions on the role of boards.business Updated: Jun 19, 2009 20:45 IST
The government is set to scrutinise the role of independent directors in companies, now that the dust has settled around the Satyam saga that triggered new questions on the role of boards.
Union Minister for Corporate Affairs Salman Khursheed told Hindustan Times in a recent interview that all steps would be taken to ensure that accountantability and transparency were maintained in company administrations.
“We would focus on further strengthening corporate governance and take it to the next level. Accountability and transparency would be key,” he had said.
Elaborating on this, government sources said that such a move would reflect in legislation and policies concerning the role of independent directors.
“We are analysing and scrutinizing the role of independent directors to make sure that they are truly independent,” said a senior government official who did not want to be identified.
Describing the role of the directors as “critical,” he added that the thinking would be reflected in amendments to the lapsed Companies Bill which is expected to be reintroduced in parliament sometime this year.
Indications are that the government may make it mandatory for them to follow a set of norms before approving the accounts of firms on whose boards they sit.
The new Companies Act may define the role, position and powers of independent directors to ensure no conflict of interest.
Under one proposal, independent directors with any prior connection with the promoters or the management may not be appointed on the board of that company.
Manoj Kumar, managing partner of Delhi-based legal firm Hammurabi and Solomon said that the role of independent directors must be made more effective.
“It is one area which must be looked into by the government and steps are needed to ensure that they are independent in nature,” he said, adding that they should be allowed to verify the company accounts and seek information for the same.