India Inc sends independent directors back to school

With a perceived shortage of capable independent directors, in the backdrop of the new Companies Bill, corporate giants are encouraging initiatives from organisations to train executives in this regard.

The recent training-cum-certification programme by the UK-based Board Alliances Limited and the SP Jain Institute of Management and Research, Mumbai, along with KPMG and Hunt Partners, has seen  participation from corporate groups such as Piramal, HDFC, Knight Frank and Tata Steel.

Nitin Kini, partner at KPMG India, said: “At present, India Inc is facing a shortage of ‘truly independent’ directors and this situation is expected to worsen with the new Companies Bill becoming an Act. An initiative is necessary to create a pool of high quality IDs from which nomination committees and promoters would have a choice to select talent for their boards.”

“Starting from the requirement to have a minimum required number of IDs on a Board and specifically examining the independence of IDs, the Companies Bill 2012 has tried to cover a lot of ground,” said Suresh Raina of Hunt Partners. In the new law, at least a third of the board should comprise of IDs.

For building capable IDs, the courses referred to have a focus on familiarisation with global best practices in corporate governance, understanding the liabilities and duties of a non-executive

and knowledge of behavioral skills required to better manage boardroom conflicts.

Pranab Datta, chairman at Knight Frank India, who has participated in the course, said: “Directors on boards have a huge responsibility thrust on them  and such courses can be enlightening in better appreciation of that responsibility and discharging it.”

The Companies Bill asked for promoting gender diversity by specifying induction of a minimum number of women directors, limiting the tenure of an ID to a maximum of two tenures of five consecutive years, with a cooling- off period of three years between the two tenures. The bill also demands a data bank of IDs and the need for their training, to enhance the pool of those eligible and qualified.

Datta added, “The old boys’ club of boards will soon be on its way out, particularly for companies that believe in augmenting shareholder value.”

Sudha Ravi, chief executive officer, PHL Finance, the non-bank finance arm of the Piramal Group, said, “With the fast growth in the economy, businesses have expanded considerably, increasing the role and responsibilities of IDs. So, there is a need for various initiatives to help IDs with knowledge across sectors and to update the latest regulatory developments.”

According to the Bill, a person cannot become a director in more than 20 companies and not in more than 10 public ones.