Nominees should not be considered independent directors: ICSI
Press Trust of India / New Delhi Dec 09, 2009, 20:58 IST
The Institute of Company Secretaries (ICSI) has said that representatives of financial institutions on the board of a company should not be considered as "independent directors" as they are more concerned about safeguarding their own interest.
In a recommendation on corporate governance given to the Corporate Affairs Ministry, ICSI suggested that considering nominee directors as independent directors is an "anomaly" and "needs to be rectified", as they may not be truly independent.
"The nominee directors have a clear mandate to safeguard the constituency they represent, i.e., the financial institution they represent. Hence, to term them independent is an anomal...(and) needs to be rectified in clause 49 (of Sebi's Listing agreement)," ICSI said.
The Companies Bill 2009, which was reintroduced in the Lok Sabha in August this year, defines independent director, as a "non-executive director of the company, other than a nominee director" and ICSI says the same change could be replicated in the Clause 49 of Sebi's listing Agreement that deals with corporate governance compliance.
The suggestions hold significance as the government is to introduce a voluntary corporate governance code for industry by the end of this month.
The MCA has also invited suggestions from industry representatives on the guidelines.
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