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Letters: 'Dependent' directors

Understanding a company, its environment and its practices cannot and is not a part-time business

Business Standard 

With reference to “What ails independent directors” (December 25), in an otherwise succinct article, the elephant in the room does not get discussed though an inkling is noticeable when the talk is about increased remuneration. My experience suggests none of the “independent” directors can or has in-depth knowledge of the company they are on the board of, since the flow of activities varies substantially across firms even within the same business environment. Neither are they able to determine who controls which sector of the firm and how those relationships play out. In Indian companies, sales, purchase and finance are areas where greater emphasis and oversight is placed by the erstwhile owners (for reasons that would be clear to anyone running a business as these are areas where “leakage” is possible). No independent director can have insights here. Many “independent” directors are chosen for their perceived “image” value and the larger this is, the more abstruse their comments at board meetings.

A close friend who ran a billion-dollar hedge fund had this to say — the “outsiders”, be they consultants or directors, only see what the management wants them to see. So, it looks good in theory and on paper, but there are few diligent independent directors (since managements tend to keep them on their side with low-hanging fruits). Understanding a company, its environment and its practices cannot and is not a part-time business. The only ones with some skin in the game, apart from the management, are those within who are independent and objective viewers. Some of them turn into whistle-blowers — all others value their self-interest more and go with the flow. I do agree that MNCs don’t do any better, with their compartmentalised (blinkered) divisions reporting to more than one power source while their comfortable lifestyles make them risk-averse. Asit Desai by email

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First Published: Mon, December 25 2017. 22:33 IST