Hemendra Kothari, Chairman, DSP Merrill Lynch Ltd, one of the biggest investment banks in India, must be heaving a sigh of relief. He had the unenviable task of finding independent directors for Satyam Computer Services Ltd, besides exploring merger options after shareholders pummelled its board as well as its stock for outrageously proposing to use Satyam’s money (which turned out to be non-existent subsequently) to acquire promoter-held sister firms Maytas Properties and Maytas Infrastructure. But within a week, a day before promoter and founder B. Ramalinga Raju’s damning confessions of a large-scale fraud in Satyam, Kothari terminated his firm DSP Merrill Lynch’s advisory engagement with the company. He doesn’t have to hunt for independent directors anymore.

In fact, just a couple of days ago, Kothari was terribly upset over the ‘look-out’ notice issued by the Andhra Pradesh Police against his friend and one of the oldest investment bankers in the country, Nimesh Kampani, Chairman, JM Morgan Stanley. Kampani was an independent director in Nagarjuna Finance that is now caught in a storm for not having paid back deposits raised from the public. “Kampani is not a criminal. He had quit the Nagarjuna Finance board in 1999. As things stand, it is so difficult to find independent directors. With events like these, you can expect many of them wanting to resign,” he says.

Finding independent directors is kind of both easy and difficult. Easy, because the Companies Act does not prescribe any qualification or eligibility. In India, retired bureaucrats, chartered accountants, friends of promoters, political persons, etc., get a quick berth on company boards. And difficult, if companies are serious about corporate governance. Independent directors, anyway, make sense only if they are well-educated, can add value to the company, be independent of promoters’ influence despite being paid by them, and represent minority shareholders’ interests.

... contd.