There is need to create database to identify independent directors:Komal Anand 6/23/2005 11:07:03 AM IST

In view of the revised clause 49 regulation that there would be a statutory requirement for the companies to have number of independent directors on their board from January 2006, the Government on Wednesday said that there is a need to create a database of such individuals, who could fulfill the criteria of becoming independent directors.

Speaking at a roundtable on independent directors, Komal Anand, Secretary, MCA, said that the Government was working towards creating a pool. She however remarked that the initiative was only to "catalyse" the preparatory phase towards creation of such a database. "Exact definition of independent directors have varied over the years. However, ideally independent directors could be a person who is an achiever in his field of activity," she said.

The round table was organized by National Foundation for Corporate Governance (NFCG), a trust set up by Ministry of Company Affairs in partnership with Confederation of Indian Industry (CII), Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India.

Describing the recently released Dr J J Irani Committee report on corporate governance, as an enabling forwarding statement, Ms Anand said that the Government was working towards devising a revised Company's Act, to suit the new environment.

Talking about the objectives of the NFCG, she said that the key objective was to create awareness on the importance of implementing good corporate governance practices, both at the level of individual corporations and for the economy as a whole. She said that the Foundation had charted out a strategy, and would seek to provide a platform for professionals and corporate leaders through workshops, conferences, meetings and seminars.

Y S Malik, Joint Secretary, MCA, pointed out that the concept of independent directors was here to stay, whether mandated or otherwise. He said that the concept of having independent directors on board was a step towards good corporate governance, even though there could be attached costs to it. He estimated that the attached costs could be around Rs20bn, but added that the value addition would "significantly outstrip the costs." He also mentioned that there is a requirement of 3,000 to 4,000 persons for about 6,000 companies, and asked the various industry bodies to draw up a list of such persons.

Jitesh Khosla, Joint Secretary, MCA, said that it was for the first time that the definition of independent director had been defined in the companies act as per the recommendations of the Dr J J Irani Committee. He felt that it was a significant move to acknowledging the importance of independent director and added that it would give a clear direction on the accountability and liability of independent directors.

Adi Godrej, Chairman, CII National Council On Regulatory Framework and Corporate Governance, stressed the need to harmonise the differences between the SEBI clause 49 regulations and the recommendations by the Dr J J Irani Comittee. He suggested that there should be a clear direction to the industry to follow the number of independent directors to be inducted on the board.