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Attributes of an Independent Director. Interactive Presentation By Ashish Makhija, AICWA, LLB, FCA. Corporate Governance. Independent Directors is a concept of Corporate Governance Why Corporate Governance has assumed greater significance today?. Why Corporate Governance now?.
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Attributes of an Independent Director Interactive Presentation By Ashish Makhija, AICWA, LLB, FCA
Corporate Governance • Independent Directors is a concept of Corporate Governance • Why Corporate Governance has assumed greater significance today?
Why Corporate Governance now? • Company has no mind and body – it only has a soul • Board of Directors are the directing mind and will of a company • Divorce of ownership and management • Protection of interests of stakeholders
Directors under Corporate Governance • Independent Directors • Non-management Directors • Necessarily be Non-executive Director • Dependent Directors • Management Directors • Can either be an Executive Director or a Non-executive Director
How the concept came to India? • Stranger to Companies Act, 1956 • Kumar Mangalam Birla Report on Corporate Governance • Concept of Independent Directors was brought in Clause 49 of Listing Agreement • Recommended by Narseh Chandra Committee Report
Who can be called Independent? • One having no Material Relationship • Relationship not only from the stand-point of the director alone • All persons or organizations with which the director has affiliation Criteria for Determination of Independence
Concept Paper • Section 2(45) – Independent Director means – • A Non-executive director • Can receive director’s remuneration • Does not have any material pecuniary relationship or transactions of such amount as may be prescribed with …………
Concept Paper • …….. the company, its promoters, managing director, whole-time director, other directors, Manager, holding company or subsidiary company • Possessing such ATTRIBUTES as may be prescribed by the Central Government
Attributes • What should be the attributes? • Is attribute a legal term? • Can any law prescribe attributes?
Attributes • Dictionary Meaning “A quality or characteristic inherent in or ascribed to someone or something”
Attributes • Ability to ask hard questions • Ability to work well with others • Ability to listen patiently • Ability to contribute valuable inputs • Awareness about Industry
Attributes • Available when needed • Alert and Inquisitive • Integrity • Expertise • Experience
Attributes • Independence of Thought & Action • Qualitative Independence • Independence “infact” • Ability to deal with ‘conflict of interest’ • Knowledge
“Character is like a Tree and Reputation like its shadow; the shadow is what we think of it, the tree is the real thing” ……Abraham Lincoln
Related Issues • How to ensure coordination between Independent Directors? • What should be the Tenure of Independent Directors? • Whether Independent Directors be paid Remuneration? • Can any law prescribe attributes?
CA’s as Independent Directors • Like Independent Director, CA plays a role of a watchdog • Independent Director must be financially literate • Better than Decorative Directors • Ability to question candidly • Bring in external perspective
Thank you Ashish Makhija 9810128356 amc_ca@vsnl.com