Independent Directors: Now No Different from Any Other CXO of an Organization

The sixth edition of Perspective a unique initiative of Sapphire Human Solutions was held on 11th July 2019 at Hotel Grand Hyatt, Mumbai. The panel discussion was led by Mr. Kewal Handa and Mr. Ketal Dalal. Both eminent and experienced Independent Directors on the boards of several marquee companies. Mr Handa is Non-Executive Chairman Union Bank of India and serves as Chairman Audit Committee on the boards of Clariant Chemicals, Greaves Cotton & Mukta Arts. Mr. Ketan Dalal, is an Independent Director on the boards of HDFC Life Insurance, Zensar and Jio Payments Bank.  Mr Ankit Bansal, Founder CEO Sapphire Human Solutions moderated the discussion. The Roundtable was attended by 15 corporate leaders across industry participated in the panel discussion.

Liability of an Independent Director-Section 149 (12) states that; An independent director and a non-executive director except the promoter or key managerial personnel, shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes and with his consent or connivance or where he had not acted diligently. (Source: Institute of Company Secretaries of India)

This places a huge responsibility on the Independent Directors and is viewed with trepidation by aspirants and justifiably so; given the implication as stated in the section mentioned above. Despite this reality, there are Independent Directors who are making a difference to companies and affecting change. Also there are aspirants who are ready to walk down this road but have questions and they want answers which will help them make the right choices. Mr. Dalal strongly suggests that before accepting or applying for a seat one should research and find out about the market reputation of the company, composition of the existing board, speak to the CEO/CFO and find out when the Balance sheet is finalized. This should give the aspirant enough data points to make an informed decision. Mr Handa was of the view that aspirants should be clear about the change one wants to make, find out what are the expectations from the Independent Director. One should also go through minutes of board meetings as it reflects the quality & depth of discussions.

While some panelists were of the view that the law is skewed against the Independent Directors, Mr Handa and Mr Dalal clarified that if a director works diligently and without any mala fide, he or she has no reason to be worried. Also the role and responsibility of the Independent Director is no different than any other CXO of an organization as he/she has to take business decisions which will be judged by the outcomes. There is a practice of the discussion topics getting clubbed in the Information section, these needs to change and be brought in Topics for Discussion. There are also separate meetings for Independent Directors where relevant issues are discussed.

There are differences in the structure and opportunities in the boards of Indian companies vis a vis MNCs. Mr Handa shared that by design the MNC boards have limited Promoter stakes, have high ethical standards of governance and a high degree of compliance. But the flip side of being on a MNC board also means certain domains are out of reach of Indian Independent Directors. Strategy roles for example or being on the Nomination and Remuneration committee.

The panel also deliberated on the question of what is the pay off for an Independent Director other than the monetary aspect. Mr Dalal shared his experience of being an Independent Director having enriched his learning of various aspects of business. Mr Handa says that he has had a humbling experience and tremendous professional satisfaction by contributing to the betterment of the organization.