New Delhi: The Institute of Company
Secretaries 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.
Earlier, a committee headed by Naresh Chandra also
suggested that nominee directors be excluded from the pool of
The apex body for company secretaries ICSI has also said
that the maximum tenure for independent directors should be
six year and the maximum number of listed companies in which
an individual can serve as a director be restricted to seven.
"The board should undertake a formal and rigorous annual
evaluation of its own performance and that of its committees
and individual directors," ICSI said.
It further said that there should be a clear demarcation
of the roles and responsibilities of the Chairman of the Board
and that of the Managing Director or CEO.
"The roles of Chairman and CEO should be separated to
promote balance of power," ICSI said.