The Hindu : Business : `Raise the bar on performance of professionals'

Online edition of India's National Newspaper
Saturday, Aug 12, 2006

Business

Business

`Raise the bar on performance of professionals'

Special Correspondent

SEBI to crack the whip on unqualified `professional' directors

BANGALORE: The Securities and Exchange Board of India (SEBI) will shortly make public the names of those who have joined the boards of companies as `professional directors' without meeting the norms.

SEBI Chairman M. Damodaran on Friday urged corporates to refrain from appointing as directors on their boards the people who did not own a single share in companies.

"There are so called professional directors on the boards now... not professional directors in terms of a director (finance) or director (materials) or director (human resources) but men and women who have made it their profession to be directors on boards,'' Mr. Damodaran said, while delivering the inaugural address at an orientation programme for company directors and other professionals on "New frontiers of corporate governance'' organised by the National Law School of India University in collaboration with the National Foundation for Corporate Governance.

The SEBI chief said these people had outlived the CEOs and even promoters by serving for too long without making any effective contribution to the company.

"I do not mind if they are on a number of boards provided they read papers, think about the issues and contribute effectively rather than get into a large number of boards. But, I certainly mind when these people get on boards and become permanent entities, more permanent than the furniture in the boardrooms,'' he quipped.

Exhorting corporate houses to raise the bar on performance of professionals and good governance, Mr. Damodaran said SEBI would ensure that the corporates continue improving their performance.

For this purpose, SEBI had drafted a separate set of rules to help companies follow prescribed practices, Mr. Damodaran said.

Noting that good corporate governance should first start at the board level, Mr. Damodaran said companies should ensure appointment of good hands on their board and compensate them well.

"If you do not pay well, you do not get good directors, nor can you retain such people for long,'' he said.

Besides, to ensure good corporate governance, companies should have a proper evaluation process in place to rate the performance of the board members and ensure that only professionals are appointed as directors and not those who make it a profession of becoming directors, he said.

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