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Political appointees to PSU boards undermines Modi’s push for meritocracy

An `independent’ director from a political party getting on to the board of a company may seem like a bit of contradiction in terms. But such appointments are routine in our system

editorials Updated: Jan 27, 2017 17:23 IST
Hinduastan Times
Modi,Andhra Mahila Morcha,Appointments Committee of the Cabinet
Shazia Ilmi, a mass communication graduate , has been appointed as an independent director in Engineers India Ltd

An `independent’ director from a political party getting on to the board of a company may seem like a bit of a contradiction in terms. But such appointments are routine in our system. The NDA’s Appointments Committee of the Cabinet has now cleared at least 10 politicians affiliated with the ruling party to positions as independent directors of various public sector undertakings (PSU). Among the PSUs are Engineers India Ltd, Hindustan Petroleum Corporation Ltd, Bharat Heavy Electricals Ltd and National Aluminium Company Ltd. In 2014, the Securities and Exchange Board of India had made amendments to Clause 49 of the listing agreement for companies making it mandatory for at least 50% of directors to be non-executive or independent among which should be one woman director. The UPA too used to appoint its own politicians to various boards.

But by what stretch of the imagination can a politician who is active in a party be called an independent director? Given past experience, this would be an easy way for the government of the day to interfere even more with the workings of the PSUs. Many of the PSUs are bleeding money and they require directors with expertise. A politician with no experience in the core competence of the PSU concerned is more a liability than an asset to the company.

Read: IITians excited by return of recruiters from PSUs

In addition such independent directors are given sitting fees and reimbursed for travel. Nothing wrong with that except that they are expected to add value to the company, which is hardly ever the case. There are several experts available whose knowledge and skills can be utilised by the PSUs.

This practice of nominating politicians is a way of bestowing grace and favour on a chosen few and should not have any place in a merit-based and competitive business operation.

Some of the appointments are downright baffling. A politician whose qualifications are in mass communications has been appointed to Engineers India Ltd. An Andhra Mahila Morcha head has been appointed to the Export Credit Guarantee Corporation Ltd. It may be recalled that in 2014 when United Bank of India was in the news for its rising non-performing assets, the bank had over the preceding years appointed to its board a politician, a media manager and a businessman none of whom had any qualifications to help the ailing bank.

Read: Govt asks PSU banks to focus on opening Jan Dhan accounts

Prime Minister Narendra Modi is particular about meritocracy. It is a principle which should apply to the PSUs. The appointment of politicians also brings with it the danger of decisions being pushed with may not be good for business but may be advantageous for the party in power.

Read: Govt’s plan to consolidate PSU banks may be shelved due to demonetisation

This practice must end and efforts to derail professionalism in PSUs must certainly not come from the ruling party.

It should lead by example and not emulate the worst in its predecessor.

First Published: Jan 27, 2017 17:02 IST