Independent directors bail out of boards

Independent directors bail out of boards
The Economic Times, February 12, 2009, Page 1

115 Resign In A Month As Satyam Case Underlines Liabilities Of Board

Mahima Puri & Vivek Sinha, ET Bureau, New Delhi

There has been a sharp rise in the number of independent directors stepping down from boards of listed Indian companies in the past month, after the recent fraud at Satyam Computer Services put the spotlight on the responsibilities and potential liabilities that could accompany this vital, yet hitherto largely ceremonial function.

Some 115 independent directors on the boards of more than 100 listed firms have quit between January 7 and February 7 this year, data compiled by research firm Prime Database along with the Bombay Stock Exchange show. This compares with a monthly average of 50-60 resignations in the past two years.

The link with the developments at Satyam is clear from the fact that it was on January 7 that the Hyderabad-based company’s founder B Ramalinga Raju confessed he had fudged the firm’s accounts for years. The revelation, which took the lid off India’s biggest corporate scam, culminated in a spate of resignations from the company’s board and ultimately led to the government sacking and replacing the board with directors nominated by it.

The Satyam episode tarnished the reputations of its six independent directors, and some of them have been forced to engage lawyers to fight possible litigation by investors, both in India and abroad.

SAFE THAN SORRY

Independent directors shy away from promoter-led cos & firms with strong govt links