The working group on corporate governance appointed by the department of company affairs is likely to recommend that directors in companies disclose their holdings and also keep the board informed if they are bidding for contracts tendered by the companies.
Headed by Pawan Kumar Vijay, president, Institute of Company Secretaries of India, the working group will propose a code of conduct for directors and recommend a role for nominee directors on the boards of various companies. The report is expected to be submitted to the department in a fortnight.
In addition, the working group is planning to put in place a structured agenda for board meetings, prescribing dos and don'ts for directors. The group is considering making it mandatory for all directors to inform the board whether they, or their family members, hold shares in the company or in its subsidiary.
Similarly, if a contract is to be awarded by the company, a director will be required to inform the board that he is one of the contenders for the contract, either directly or indirectly, and should stay away from the decision-making process.
Among other things, a director has to be well versed with the provisions of the Companies Act, 1956 and ensure that the various legal provisions are met.
Directors will also have to ensure that the board takes into account the overall market dynamics before arriving at a decision. A databank of independent directors is also proposed to be created, which might be useful in analysing performance.
A code of conduct for nominee directors was put in place in March 2002.
"We have decided to define the role of a nominee director so that he works towards the growth of a company instead of being worried only about recovering the dues of the institution he represents. A nominee's role will be similar to that of an independent director," said a member of the working group.
The committee is also planning to prescribe a minimum holding of shares for a shareholder to be eligible to move a resolution or call for information or seek removal of a director.
In addition, it has decided to link disclosures of a company to the amount of public funds used by the company. Those companies that have not taken deposits from the public or financial institutions will need to make fewer disclosures.