LATERAL POINT

Real board independence is elusive

Posted: Saturday, Feb 05, 2005 at 0000 hrs IST
Updated: Saturday, Feb 05, 2005 at 0000 hrs IST

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• Companies choose ‘independent’ directors who are willing to collude
• Quality of ‘independence’ of directors depends on vision of those in control

The second approach is of companies which will comply with enthusiastic noise, supporting the idea of independent directors. These companies will induct faces known to the media and capital market analysts. Behind the facade of independence, concealed wiring is established that would keep their independence on a leash. These independent directors will indulge in much governance-speak and gibberish, as some of them would have no clue about how the industry operates. But they would not undermine the promoters’ interest, even if it means justifying non-transparency, conflicts of interest, self dealing, and related party transactions.

The third approach is adopted by wise companies that wish to leverage on the independent directors to elevate their strategic thinking to fight risks and gain competitive advantage. They value independent directors as a strategic resource—not as publicity material. They profile their boards and induct fit, proper and competent independent directors, who can contribute to making unique choices that competition is...

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