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Appoint
independent directors by Dec 31 or face penalties: Damodaran
New Delhi , May 7
THE
Securities and Exchange Board of India (SEBI) Chairman,
Mr M. Damodaran, today said that companies that do not
appoint the requisite number of independent directors
on their board by December 31, will be liable to pay heavy
penalties.
"I expect companies in the public and private sectors
to find independent directors by December 31... there
could be penalties after that and that could be costly,"
Mr Damodaran told industry captains at a seminar organised
by the Associated Chambers of Commerce and Industry (Assocham).
Keeping in view difficulties being faced by corporates,
SEBI had earlier extended the last date to December 31
from the earlier deadline of April for compliance of having
a requisite number of independent directors on company
boards, as envisaged in Clause 49 of Listing Agreement.
But Mr Damodaran made it clear that SEBI will ensure that
corporates stick to the deadline this time. "Time is ticking
and we must get the process started. If that does not
happen, there could be penalties that are uncomfortable
and can erode investor confidence," he said.
Mr Damodaran was not ready to buy industry's argument
that they cannot find about 25,000 independent directors
in a country of one billion.
"Further, there is no bar on one person being on more
than one board.
"I am not persuaded that companies, which are seriously
looking around, may not find the adequate number of independent
directors between now and December 31.
"I, therefore, advise the corporate sector that they should
appoint independent directors, well within the deadline,
who can rightly question the decisions of the board and
demand disclosures of information that can protect the
investors' capital and their commercial interests," he
said.
He further added that examples such as Enron could be
avoided if corporates have seasoned and right people as
their independent directors, adding that such people will
help millions of investors from being fleeced from corporate
scams.
Admitting that there would be costs associated with adherence
to Clause 49, he said it should not be viewed as expenditure
but as investment adding value to the company as foreign
investors are now looking at expanded opportunities in
the country.
At a time when the entire world is looking at India as
a potential investment destination, he said the country
needs to set high standards in corporate governance to
attract more investment that will sustain high growth.
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