Sebi introduced Clause 49 (Corporate Governance) of the Listing Agreement with a mission to ensure adoption of best practices in? corporate governance. Undoubtedly, this regulatory provision by Sebi has added value in this direction.? As one of the steps towards this goal, the government introduced nominee directors, including independent directors, on the boards of public sector enterprises (PSEs) who were conceptualised as the bridge between the government and enterprise. As such, these independent directors were given the twin objective to safeguard the interest of the government, other shareholders and the enterprise.?To play this dual role, they are supposed to approve the agenda in board meetings, keeping in view the twin objectives.?They are also required to fairly assess that all statutory liabilities, loan repayments as agreed with financial institutions and interest on loan capital have been duly paid.
It is now the time to review the performance of these independent directors. The problem is, if there is no feedback/review mechanism on their performance, there is a likelihood of many aberrations depending upon the quality, nature and aptitude of independent directors.? So, while there is no denying the fact that independent directors are the real watchdogs, there is no harm in continously evaluating their performance.
Now, even though there is a provision for laying down code of conduct (which could be one way to evaluate independent directors) for all board members of the company, this has been limited to a few ritualistic disclosures by them.?There is a need to develop a universal code of conduct, taking into consideration past experience and also going by international experience.?It appears some exercise has already been initiated by the department of public enterprises (DPE) and Public Enterprises Selection Board (PESB), but the exercise will not be complete unless the views of all stakeholders like government departments, academicians, researchers and CEOs of PSEs (and private sector) are shared at one platform to arrive at a meaningful code of conduct.?
?The author is director general, SCOPE