New Bill to define company directors’ role

New Bill to define company directors’ role
Hindustan Times – Business, July 10, 2009, Page 1

The government is out to clearly define the role of independent directors on company boards through amendments to the Companies Act.

While the role of independent directors came into question after the country’s biggest corporate fraud shook Satyam Computer Services this year, ambiguities on what they are expected to know or do cast a cloud on their role.

The new Companies Bill, which is due to be introduced in Parliament in the current session, will clearly spell out the role of independent directors, Corporate Affairs Minister Salman Khurshid told Hindustan Times in an interview.

“We want to provide protection to independent directors so that they can operate without any fear and the Companies Bill would clearly spell out what they are required to do or know, in case something goes wrong outside their ambit, they would not be held responsible,” he said.

However, the government is not in favour of chalking out a common list of independent directors for companies to maintain the directors truly independent in nature as suggested earlier by several quarters.

“We need to provide protection to independent directors and they would be held responsible only if there is discrepancy in their ambit. Outside that they would not be responsible and would not be held accountable,” Khurshid said.

After the unfolding of the Satyam episode in January, more than 400 independent directors in various companies had resigned, many of them in fear or anxiety over being held accountable for things beyond their control.

The exodus is becoming a cause for concern for India Inc. “We are aware of the issue and the Companies Bill would address the issue,” the minister added.