Independent directors don’t want to be handpicked by company owners: Survey

NEW DELHI: Independent directors in leading companies believe that their appointments should be made by a self-governed body, formed by listed companies, and not by promoters of companies, as is the practice now, reveals a survey on corporate governance conducted by advisory firm KPMG.

According to the survey, conducted between November 2008 and January 2009 covering about 100 executives including CEOs, CFOs and independent directors, there is a need for empowering independent directors and limiting the number of directorships one can hold in companies.

���As long as we continue to have a process where appointments of independent directors are largely driven by promoters, empowerment of independent directors and protecting minority shareholder interests will continue to be areas of concern,��� said a statement from KPMG quoting its COO and advisory services head Richard Rekhy. Since hiring as well as paying the remuneration of independent directors are carried out by the management of a company, it is feared that these professionals may not be in a position to disagree with questionable proposals by the management.

In such situations, it is difficult to get the independent directors act in the best interests of stakeholders,
including minority shareholders, employees, customers and vendors. This may be the time for formation of an independent body, which may be funded by listed companies, whose primary objective would be to ensure registration of all independent directors, the KPMG statement added.

The respondents to the survey also suggested that board members should be given more time to analyse the proposed decisions before they take a view. They also called for limiting the number of directorships one can hold in various companies. Now the maximum number of directorships allowed is 15, which according to some, makes it difficult for directors to apply their minds properly on individual company���s decisions.