Column : Abolish independent directorship

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: that the final board composition reflects the share of each group in the overall ownership of the total equity shares. With this, each nominee to the board would represent a stake in the company and this would ensure that the management or the promoter does not compromise the interest of the various shareholder groups since they are all represented on the board.

2. Nominations from non-promoters should necessarily include a professional accountant and a professional lawyer. These two professions are the most important in ensuring that the company maintains proper books of accounts and is compliant with the provisions of the law.

3. Any owner group that has 10% or more of the equity should have a representation on the board. Remainders from ownership groups of less than 10% should be aggregated at the sub-group levels. With this, the broad distribution of the board would reflect the distribution of ownership.

4. Owner groups may engage professional directors and pay them to represent their interests on the board. This would bring in greater professionalism into the board. Each owner group may decide the kind of expertise it would like to bring into the board. So, typically, a large private equity investor would not only provide the financial capital to the company but also some human capital on the board. However, representatives of non-promoters should include a professional accountant and a professional lawyer.

Such a board would not be a reflection of merely the promoter group as is the case currently. Election to such a board would now be stratified according to the ownership. Currently, a promoter with a 51% ownership of equity (often even lesser) can dictate the entire board. In the proposed dispensation, such a promoter necessarily dictates only 51% of the board.

If we apply the above rule to a standardised board size of 11 members, the Raju family could have elected only one person to the board. The rest would all have been nominated by non-promoter groups. Of these, FIIs would have elected five. If some of these were professional and independent accountants and lawyers, it would have possibly saved the country from a major disaster.