"It is no longer an old boys’ club where so called independent directors used to hobnob with the promoters and management and hardly a dissenting opinion was expressed at board meetings,” observed senior lawyer, community activist, bon vivant and Parsiana columnist Berjis Desai. He was appointed independent director in pharmaceutical company Hikal Limited with effect from October 1, 2023.
Berjis Desai: "selective in accepting directorships”
With 43 years of legal practice, Desai is an independent director of five listed companies: Praj Industries Limited, Jubilant Food Works Limited, Star Health Allied Insurance Company Limited, Chambal Chemicals and Fertilizers Limited and Hikal Limited. He is a non-independent director of two listed companies, The Great Eastern Shipping Company Limited and Man Infraconstruction Limited. He is a non-independent director and chairman of the boards of two about-to-be-listed companies, Emcure Pharmaceuticals Limited and Inventurus Knowledge Solutions Limited.
The responsibilities and role of independent directors of listed companies have increased manifold in recent years, noted Desai. "Board and committee meetings every quarter are now a daylong affair with frequent approvals sought in between. While the sitting fees have soared, so has the stress for all directors,” he stated. Professional directors have become highly selective in accepting directorships and want to be satisfied that the management style is kosher.”
Under the Indian Companies Act of 2013, independent directors are non-executive directors who contribute to improving corporate governance and are not directly or indirectly associated with the company’s day-to-day operations. Every listed public company must have at least one-third of their total number of directors as independent directors. A non-independent director is one other than an independent director.
The nominations of the individuals selected have to be approved by shareholders and meet increasingly stringent criteria. "Term limits, age restrictions, no financial relationships with promoters and passing an online exam have been implemented… Foreign institutional investors generally follow the recommendations of proxy advisory firms who keep a hawk’s eye and insist on more exacting standards than what the law requires. In a few instances, the appointees have failed to garner shareholder support,” Desai added.
The chairman of the audit committee of public companies has to be independent and his role is more onerous. "Whistle blowing complaints and sexual harassment complaints are addressed by him…and when the proverbial ‘matter’ hits the fan, he too can find himself in the hothouse,” Desai laughed.