Panel On Corporate Governance Meets Today
The 30-member parliamentary committee on corporate governance, headed by Murli Deora, will be meeting today to deliberate on the role and contribution of a nominee director.
The committee is expected to outline the role a nominee director can play in bringing about greater transparency in corporate dealings.
"There are two sets of relationships - one that involves a lender and a borrower like the relationship between banks and corporates, and the second that is between a company and a shareholder as is the case of the relationship of the corporates with Unit Trust of India, Life Insurance Corporation of India, GIC etc. What needs to be determined is the role of the nominee director in the two circumstances, and his role in the enhancement of shareholder value," sources said.
"In many cases, the government holds the nominee director, instead of the whole board, responsible for a lapse, and that too on a post operational basis as was the case in the ITC issue. In this context , it is important that the ground rules be set, and that the nominee director is kept aware of certain key financial decisions so that he, in turn, can help introduce good practices," the sources added.
"Hence, certain key financial areas needs to be identified decisions on which should be mandatorily discussed with the nominee director," they added.
The other issue which is expected to come up for discussion is the time when a nominee director should come abroad a company board.
While there is an opinion that the nominee director should join the company board from day one, there are others who feel that the nominee director should join the company board only in case of a default.
The role of professional management in corporates is also expected to figure in the deliberations. "In many cases, the professional management has a negative attitude to what they see as monitoring by lenders through nominee directors. However, an owner-manager's responses are generally more positive about the role of a nominee director as he views the relationship as a long term one,'' sources pointed out.
"Hence, there needs to be a change in perception, a change in mind set of all concerned - lenders, corporates, institutions as well as the government'' they added.