Very interesting piece on the role of Independent Directors. Brings up a dilemma faced by IDs in companies where unethical doings start emerging - should the ID mark his/her protest by stepping down or should they continue in order to try fixing the problems (and risk getting embroiled in the scandal which invariably follows)?
I liked the simplicity with which Mr. Aga directly admits that no realistic remedy has been thrown up yet, on the issue of wayward governance standards. We read so much on prescriptive governance solutions but the reality is what Mr. Aga has said so clearly. ....
"Several Indian corporates are ‘known’ to be wayward in governance standards. But what comes to the Audit Committees is “rinsed” data. The Audit Committee should in such cases probe deeper. But that rarely happens. This subject gets to the heart of appointment of IDs. No realistic remedy has yet been thrown up, but I guess something will emerge before long."
Good insight on ID. Truly independent directors are a necessity, however women directors on the board may infact be counter productive to the effort at 'emancipation' of women.
I recollect Prof Madhava Menon in one class exclaiming "common sense is commonly uncommon"
Great insights on independent directors!! Thank you so much for providing that enlightenment especially to many of us who are nowhere close to the board member roles.
Just a question that comes to mind is the methodology used to appoint the number of ID's for a particular company. Should it logically not be a ratio to the number of shareholders 1:10k for example? And if indeed so then what would be the optimal number?
The comment on being “taken for a ride” reminds me of the time in 2001, when I was in charge of e-commerce business of Federal Bank when we launched Mobile Banking facility in association with Escotel (the then popular mobile service provider). The advertisement announcing the launch had the headline “Now take your bank for a ride” and followed it up in the text that you could now have your bank in your pocket and take it along when you go out.
Despite that common sense explanation, we faced a barrage of criticism, even from within the Bank, then for that headline, wrongly implying that we didn’t seem to know what “taking your bank for a ride” really meant !
At the risk of sounding like a MCP (Male Chauvinist Pig), I beg to differ in the matter of reservations, even though I agree that women have been discriminated against in the past and even in the present. But, personally speaking, to think that one can legislate to prosperity against an unjust prejudice is patently wrong. Without going into a deep study on this subject, I must state that generally these legislative decisions are made with an eye for votes rather than any genuine interest to safeguard the interest of women in general. How politicians approach these issues is best illustrated by the fact that often they tend to nominate their wife or daughter (often only if they don’t have a son) as their heir apparent. I have not done a study as such, but any examples of difference can be assumed to be against the general norm.
Back to the subject of women directors, how can one director make a difference on corporate policy beats me? While reservations could be advocated in some areas as a catalyzing change agent, I for one feel that this should not have been introduced in the matter of corporate directors especially in view of difference of opinion on the usefulness of the move. At best this can serve only as a direction indicator.
While on the subject of women and Nov 22nd, it may be noted that on Nov 22nd 1922, Rebecca Ann Felton of Georgia was sworn into office, becoming the first woman seated in the U.S. Senate. Those interested can check on her biography at https://www.britannica.com/biography/Rebecca-Ann-Felton. Despite that, it will be just short of a hundred years before we could have a lady in office in the US- that too still only as Vice –President.
Curious.. How much can the ID's accomplish if the board decision is based on majority vote? How much is the vote of an ID valued in taking critical decisions if he votes against the executive directors?
Dear MRP, how many companies do choose a really independent ID, the selection is based on word of mouth and a known person. That is not independent in true sense of word. You should have also interviewed an ID who is truly "independent" a rare commodity in this world.
Common Sense is good bit and very aptly stated.
I suggest that you pick one judgement of SC or on current issue and ànalyse it critically with your sharp intellect to state whether the said judgement is fair, correct or a misjudged version of law as commonly understood with common sense
Very interesting piece on the role of Independent Directors. Brings up a dilemma faced by IDs in companies where unethical doings start emerging - should the ID mark his/her protest by stepping down or should they continue in order to try fixing the problems (and risk getting embroiled in the scandal which invariably follows)?
Thanks Piyush
I liked the simplicity with which Mr. Aga directly admits that no realistic remedy has been thrown up yet, on the issue of wayward governance standards. We read so much on prescriptive governance solutions but the reality is what Mr. Aga has said so clearly. ....
"Several Indian corporates are ‘known’ to be wayward in governance standards. But what comes to the Audit Committees is “rinsed” data. The Audit Committee should in such cases probe deeper. But that rarely happens. This subject gets to the heart of appointment of IDs. No realistic remedy has yet been thrown up, but I guess something will emerge before long."
- hard hitting statement from Mr Aga!
Thank you Amba.
Good insight on ID. Truly independent directors are a necessity, however women directors on the board may infact be counter productive to the effort at 'emancipation' of women.
I recollect Prof Madhava Menon in one class exclaiming "common sense is commonly uncommon"
Good filter coffee as always!
Thanks Rama for the insights and comments.
Great insights on independent directors!! Thank you so much for providing that enlightenment especially to many of us who are nowhere close to the board member roles.
Just a question that comes to mind is the methodology used to appoint the number of ID's for a particular company. Should it logically not be a ratio to the number of shareholders 1:10k for example? And if indeed so then what would be the optimal number?
Has common sense gone on a ride or taken for a ride ? Shared the news letter with a friend to seek his wisdom !
Good question. Needs some common sensical answer.
The comment on being “taken for a ride” reminds me of the time in 2001, when I was in charge of e-commerce business of Federal Bank when we launched Mobile Banking facility in association with Escotel (the then popular mobile service provider). The advertisement announcing the launch had the headline “Now take your bank for a ride” and followed it up in the text that you could now have your bank in your pocket and take it along when you go out.
Despite that common sense explanation, we faced a barrage of criticism, even from within the Bank, then for that headline, wrongly implying that we didn’t seem to know what “taking your bank for a ride” really meant !
Very nice and humorous odokke tumba chennagide
Tumba thanksu kano.
At the risk of sounding like a MCP (Male Chauvinist Pig), I beg to differ in the matter of reservations, even though I agree that women have been discriminated against in the past and even in the present. But, personally speaking, to think that one can legislate to prosperity against an unjust prejudice is patently wrong. Without going into a deep study on this subject, I must state that generally these legislative decisions are made with an eye for votes rather than any genuine interest to safeguard the interest of women in general. How politicians approach these issues is best illustrated by the fact that often they tend to nominate their wife or daughter (often only if they don’t have a son) as their heir apparent. I have not done a study as such, but any examples of difference can be assumed to be against the general norm.
Back to the subject of women directors, how can one director make a difference on corporate policy beats me? While reservations could be advocated in some areas as a catalyzing change agent, I for one feel that this should not have been introduced in the matter of corporate directors especially in view of difference of opinion on the usefulness of the move. At best this can serve only as a direction indicator.
While on the subject of women and Nov 22nd, it may be noted that on Nov 22nd 1922, Rebecca Ann Felton of Georgia was sworn into office, becoming the first woman seated in the U.S. Senate. Those interested can check on her biography at https://www.britannica.com/biography/Rebecca-Ann-Felton. Despite that, it will be just short of a hundred years before we could have a lady in office in the US- that too still only as Vice –President.
Thank you Shahji. Your constructive contra views are indeed enlightening.
Curious.. How much can the ID's accomplish if the board decision is based on majority vote? How much is the vote of an ID valued in taking critical decisions if he votes against the executive directors?
Companies do not like a dissenting vote of an ID. Every effort is made to develop an acceptable solution.
Dear MRP, how many companies do choose a really independent ID, the selection is based on word of mouth and a known person. That is not independent in true sense of word. You should have also interviewed an ID who is truly "independent" a rare commodity in this world.
Common Sense is good bit and very aptly stated.
I suggest that you pick one judgement of SC or on current issue and ànalyse it critically with your sharp intellect to state whether the said judgement is fair, correct or a misjudged version of law as commonly understood with common sense
Rajinder
Great comments and thanks for the suggestion.