KOCHI: Eighty five per cent of country's Chief Executive Officers (CEOs) and Managing Directors (MDs) have favoured extension for appointing Independent Directors (IDs) in listed companies by March 31, 2006 from the existing deadline of December 31, 2005, according to Assocham Business Barometer Survey (ABB), which sought the opinion of 200 CEOs and MDs on the issue.

The survey has been conducted keeping in view of the pressure of the deadline of December 31, 2005 for undertaking the job in which a majority of CEOs and MDs of 200 companies have responded saying that most of the listed companies still need at least another three to four months to appoint the independent directors of competence, experience and calibre, according to a communication.

About 85 per cent of CEOs and MDs said that the earlier the extension granted, the better would it be for them to take on the pressures of SEBI and do the job in most professional manner, the survey said.

Assocham president Anil K. Agarwal were of the view that there was no harm if the SEBI extends its deadline from December 31 2005 to March 31, 2006 as the move will facilitate induction of wisdom and experience in the board of listed companies.

Ever since the SEBI came out with the directive that one-fourth of independent directors should be appointed by December 31, 2005, the corporates expected the extension of deadline since the time given to them was not enough.

Fifteen per cent of the 200 CEOs and MDs responding on the subject were of the view that listed companies have still enough time to comply with the directives of the SEBI and therefore did not opine for any extension.

As regards the number of IDs in the board of listed companies, 60 per cent of the CEOs and MDs felt that they neither endorse the J J Irani Committee recommendations, which suggest that the number of IDs should be one-third of the board strength, nor do they concur with SEBI guidelines, which say that the number of IDs should be 50 per cent of the board's strength.

Fifty five per cent of the top CEOs say that the decision for deciding the numbers of IDs in the board of listed companies should be left entirely in the hands of Department of Company Affairs as controversy has arisen on this issue.

"The Assocham, however, is of the view that one-fourth strength of IDs in any corporate body will make its board an ideal one as also ensure effective functioning with maximum yield."

Celebrities

On the practice of celebrities being inducted in the boards of large corporates, particularly in private sector, 70 per cent of the CEOs are of the opinion that such names make no value addition to body corporate as also often mislead shareholders. Therefore, the practice of appointing celebrities in the companies' board should be discontinued forthwith for which stringent provisions should be incorporated in the new company law being put in place, according to them. However, the remaining 30 per cent of CEOs and MDs have chosen to keep off their observations on the issue.

Asked whether IDs should be made responsible for the act of omission and commission of the management, a balanced response came with 50 per cent in favour of making independent directors responsible and 50 per cent against it.

Their unanimous opinion boiled down to the conclusion that since independent directors are representatives of the shareholders, they should also be made responsible for the acts of omission and commission of the management.

This is necessary to infuse more transparency in the functioning of the company and will also ensure that independent directors are taking active interest in the matters of management.

A majority of the CEOs volunteered to add that the new Company Law should be immediately enacted as the corporates have been waiting for the new legislation for several years and henceforth, the Department of Company Affairs should put an end to its consultation process as the more the consultation process is intensified, the longer will be the delay for the new Act to be put in place.

Printer friendly page  
Send this article to Friends by E-Mail