Company boards losing starry shine

NEW DELHI: Stars may shine on company ads but not in the boardrooms. Shah Rukh Khan may have been inducted on the Jet Airways board recently, but the days of star-spangled boards appear limited. The US-led trend that surfaced in India five years back seem to be on the wane now. Today, few companies are inclined to have stars on their boards.

While Adlabs has Karan Johar on its board, Aishwarya Rai is on the board of Sahara. Many have left such assignments. Recently, Jaya Bachchan resigned from the board of Sahara One Media. Amitabh Bachchan was on the board of Tehelka, before he resigned and actor Hema Malini was on board of ETC Networks India. Similarly, Kapil Dev has moved out of the Kinetic board.

Experts point at stricter Sebi regulations for the companies’ reluctance to bring celebrities on their boards. “For directors, accountability, liability and responsibility have increased and a director is supposed to be actively involved now,” Sunil Chandiramani, national director, risk & advisory service, E&Y, said.

For any listed company, retail public holding is for not more than 20%. There is no need to have a celebrity face on the board to attract public funds, Kaushik Dutta, partner, PriceWaterhouseCoopers, said.

“Informed stakeholders, including the promoters, don’t really care whether or not there’s a celebrity on the board. They are more likely to focus on business drivers. Essentially, these people offer little value beyond creating a glamour quotient or media coverage for the organisation,” he added.

In the earlier IPO days, stars were brought in to increase visibility of firms. Sebi cracked down on directors who would drop out of boards after the listing process was over. These days as awareness and necessity of corporate governance increases, the quality of boards is under scrutiny.

Payments made to directors have to be disclosed. Also, stars don’t come cheap. “People have also begun to question the value that these stars bring to the table,” E&Y’s Mr Chandiramani said.

Many feel celebrities are cautious and reluctant to join the boards. Sunil Gavaskar and Sachin Tendulkar allowed themselves to be co-opted as part-time directors by two companies, but they quickly moved out on learning that the companies had cleverly used their names to garner funds. Globally, there have been cases where independent directors have been sued for negligence of duty.