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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: not capable of. They do not indulge in cronyism while selecting independent directors. They would also enter into appropriate contracts that would include non-disclosure pacts, non-compete pacts, and transparent compensation contracts. They will be transparent and justify conflict of interests, where they become essential for shareholders approval.

These approaches, or assumptions behind independent directors, are not unique to India. Corporate collapses worldwide indicate that most have assumed the first and the second approaches. The minister may well have pioneered more practical thinking to ensure that the benefit of independent directors can accrue not by legislation, but through the wisdom of the company itself. Efforts must indeed be to make companies wiser through corporate governance advocacy than making unworkable rules and applying them weakly....

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