The Securities and Exchange Board of India has decided to make public the names of "professional directors", especially those that sit on the boards of many companies without owning a single share in any.
SEBI chairman M Damodaran said in Bangalore today that the days of such directors, who tend to "outlive" the chief executives, were almost over. The market regulator is looking to usher in the practices of better corporate governance.
"There are so called professionals and we will go public with these names very soon (directors, who have been in institutions and organisations promoted by institutions, which in the public perception supposedly appear as public institution). But people, who, without owning even one share, some of these are not listed, have been on boards for 10-11 years as if they own it. They have stayed on to demonstrate that they can outlive any CEO or promoters, norms and regulations. That kind of an entity needs to be tackled," he said.
His comments came during the inaugural address of 'New Frontiers of Corporate Governance', an orientation programme for company directors at the National Law School of India University.
Taking a dig at the directors, whose contributions were found to be minuscule in the companies' growth, Damodaran said: "We have so called professional directors on boards...not professional directors in terms of director (finance) or director (materials) or director (human resources). But men and women, who have made it their profession to be the directors on boards. I do not mind if they go from board A at the end of three years to board B to board C etc".
He added, "I do not mind if these directors are on a number of boards, provided they can read the papers, think about the issue and contribute effectively rather than get into a very large number of boards. But I certainly mind when these people get on to the boards and stay on as permanent entities and become more prominent than the promoters."
He called upon the companies to employ the best of the directors to assist growth: "Get the best people of the board with a finite term. Because even the best become less than good after a period of time. If you compensate them well and evaluate their functioning style and contributions, you will have a good board in place. Without a good board, you will not have performance or any worthwhile profit." Damodaran called upon companies to raise their standards of corporate governance without waiting for the regulator to prescribe the minimum level.
"Look at the best companies in the business. Look at their best practices. Do not wait for the regulator to prescribe what the minimum ought to be. We will continuously keep raising the bar. But it will be much better if the companies do it without waiting for us to raise it to the minimum level," he said.
He said companies should set examples for others by raising the corporate governance standards on their own.