The Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI) have urged the government to lay down guidelines for independent directors, including their terms of appointment, responsibilities and tenure in the company.
“After Satyam scam, people of repute have become very cautious about joining the boards of companies as independent directors because of their concern vis-a-vis legal compliances by the companies,” said ICSI secretary NK Jain.
ICAI president Amarjit Chopra said, “The government should lay down guidelines for independent directors to follow. At present, there are no fixed norms for them that define their roles and responsibilities.”
According to ICSI, independent directors can be paid a fixed contractual remuneration, subject to a ceiling or a percentage of net profits of the company.
“Clause 49 of the listing agreement needs to be suitably amended by specifying positive attributes for independent directors such as integrity, experience and expertise, foresight, managerial qualities and ability to read and understand financial statements,” Jain said.
According to ICSI, a maximum tenure of six years in aggregate should be specified for independent directors. Currently, there is no fixed tenure for an independent director in a company for it is the board that decides his term of office.