“Nearly 75 per cent of all independent directors are ‘home’ members who...are natural allies of the promoters are not independent in any sense,” said a study by research firm Prime Database, which operates website directorsdatabase.com, a joint initiative with the Bombay Stock Exchange (BSE).
Even if the “home” members, which include relatives, friends and neighbours, are qualified they cannot act independently because of their connection with the promoters, said the study based on the profiles of independent directors on the boards of 2,244 companies listed on the BSE.
The study further points out that very few women are independent directors, about 2.5 per cent of the 6,443 such functionaries engaged by listed companies. “Women in India have made rapid strides in almost all walks of life, and have not only excelled but also demonstrated a higher degree of governance. But not when it comes to directorship position. Only 2.5 per cent of independent directors are women,” it said.
As per Clause 49 of the listing agreement, 50 per cent of the directors on boards of listed firms should be independent directors. The norm was introduced by the capital market regulator Sebi to promote corporate governance.
Celebrity directors
The Prime Database study further points out that companies often engage celebraties as independent directors “to add an aura of respectibility and news value to the company, as also to impress both the institutional as well as the retail investors”.
About five per cent of the independent directors fall in the category of celebraties which include film stars, lyricists, sportsmen, defence personnel and fiction writers.
Noting that like in 1980s when the compaies hired celebrities like Sunil Gavaskar and Field Marshall Manekshaw “as selling tools for their IPOs (initial public offerings)”, the study said, “We have...now legitimised these celebrity directors by giving them the respectable title of independent directors.”
Though most people in the celebrity category would be people of high integrity, “they would have very little clue to the world of corporates or of promoters’ design. They are just happy lending their names”. Only 15 per cent of the independent directors engaged by the listed companies, the report said, are capable of adding value to discussions and participate in board meetings. These include lawyers, finance professionals and technocrats.
As regards the age profile of independent directors, the Prime Database study said that 48 per cent of such directors are above 60, while a few of them are in their nineties.
“As many as 1,380 are above 70, as many as 199 are past 80 and eight are even beyond 90,” the study said, questioning, “Are many of these fit enough, physically and mentally, for the onerous board positions?”
On the lower side, the study said, while 245 independent directors are below 35, as many as 20 have not even crossed 25 years of age.
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