Snapshot of Independent Director

The new legislation may require an independent director to have understanding of business negotiations, ability to read financial statements and a comfort level in handing numbers, a government official told ET. ?While a strong bio-data may not guarantee independence of mind.

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The idea is to ensure that companies keep in mind the rigors of this key position and choose people accordingly.? While large companies take the position of independent director as an effective medium of highlighting their bench strength, data reveal that not all independent directors are well qualified. According to Prime Database, more than 25% of sitting independent directors are either graduates or less qualified. While being a graduate may not be a disqualification for becoming an independent director, such a person would be required to have value-added knowledge.? ?A person to be appointed as an independent director should have the knowledge, skills and confidence to make informed, responsible and effective financial decisions and judgments,? a representative of industry body FICCI said. ?He should also be able to understand the transactions requiring judgements described in the policies of the company and implications of a particular management decision.?

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Directors

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Tenure of 7,121 (76%) Independent Directorship Positions is more than 3 years; 4,409 more than 6 years; 2,652 more than 9 years and 1,701 more than 12 years. Maximum tenure is 55 years.

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Education of Independent Directors

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1. 65% of ID positions are held by post-graduates (and above). Conversely, 35% of ID positions are held by general graduates or below.

2. 979 are Management Graduates (of which 123 are IIM graduates).

3. 1,149 are Chartered Accountants, 264 are Company Secretaries and 151 are Cost Accountants.

4. 945 are Lawyers.

5. 134 are Medical Doctors.

6. 1,399 are Engineers.

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1,689 individuals who are > 70 years hold 1,688 independent directorship positions.

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In the coming days we can predict that the role of Independent Directors will be invited more and more to promote transparency and accountability. Therefore ID will be required more and more.

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Regards

CS Pankaj Khanna