If you happen to be a professional to whom the allure of becoming a director on the board of a company is irresistible, here is a confidential note written by the Chairman of an imaginary company to one such aspirant, listing out the unstated terms and conditions of the offer.
From: The Chairman, XYZ Ltd.
To: A wannabe Independent Director
I am happy to know that you aspire to be an independent director on the board of our company. Whereas a formal letter of appointment would soon follow, I write to you in my personal capacity to explain the real rights and responsibilities of an independent director.
1. You shall be hired only for your fame, your excellent contacts and your eminence. Your subject knowledge, competence and seriousness of participation in the meetings are important but secondary to the scheme of things.
2. Our company believes that machinations of the management (read “real owners”) are supreme. Our business is run on a quarter to quarter basis. Any talk of business strategy, etc, happens against this background. You shall always remain an embellishment on the board and shall conduct yourself with grace and equanimity accordingly.
3. Please appreciate that the Chairman and the President/CEO are advised by the best brains in legal and accounting matters. Their word is final and binding.
4. For the sake of excellent PR, as also to keep our market image shining and bright, the company has a set of clear guiding principles, a sparkling vision document, an exemplary code of conduct, a well spelled-out corporate philosophy, a robust governance framework, a sound CSR policy and a clearly articulated intention of zero tolerance to graft, corruption or sexual harassment. However, based on exigencies faced in the business environment or the seniority of the person involved, the management reserves the right to be flexible in its approach towards enforcing the aforesaid.
5. During your tenure, you may discover some creative accounting practices resorted to by the company. You may come across audit notes which point out the calculated risks we take while planning our direct as well as indirect taxes. You may also discover highly ingenious ways in which we interpret the laws of the land. You shall be expected to put across innovative suggestions to further refine such practices. You shall not be expected to raise any objection to the same, whether in private or in public.
6. You shall be encouraged to represent a group of shareholders, or appear to be partial to a group of stakeholders of the company; provided, of course, that your performance shall always be evaluated based only on the key deliverables – namely, towing the line of the management and ensuring that the company’s image is protected and its business interests advanced at all times.
7. Should you become involved in any legal hassle owing to having not registered a dissent on issues of either corporate governance or legal compliance by the company, an issue-based support may be provided. In such an eventuality, the company reserves its right to publically disown you and terminate its association with you forthwith.
8. Any attempt on your part to form a group of Independent Directors shall be treated as an act of dissidence and betrayal by management. As a matter of corporate policy, we do not encourage dissent, whether expressed or otherwise.
9. In respect of any matter pertaining to the operations of the company, you shall never take a moral high ground and start teaching us ethics and value systems. The last thing we need is a lecture from a glorified employee, the real capacity in which you shall serve the company.
10. The company expects you to observe complete confidentiality even after the end of your term as an Independent Director.
11. Post-retirement, you shall undertake not to become a whistle-blower and seek protection under any such scheme offered by the government of the day.
12. Advances, affiliations and activities of an amorous nature attempted by you towards directors from the other sex shall be frowned upon; unless, these happen to be dictated by the business needs of the company and have prior tacit approval of the management.
Even if you do not appear in the database of prospective candidates maintained by the Ministry of Corporate Affairs, we trust that you have so far been smart enough to ensure that your legal record is squeaky clean. We are sure that you shall continue to be vigilant on this score.
We look forward to a long-term mutually beneficial association with you. We welcome you as a part of the growing tribe of (perceived to be) independent directors in the country. We have no doubt whatsoever that you shall conduct yourself in a manner which would enhance the prestige and influence of this newly created labor market.
Yours truly, etc”
Indian companies having a paid up capital of more than INR 100 millions and those whose aggregate outstanding loans, debentures and deposits exceed INR 500 millions are now required to have at least two independent directors on their respective boards. The new rules notified by the Government of India come into force from the 1st of April, 2014.
Likewise, some companies are now required to have at least one woman director on their board. For some, it is now mandated to spend 2% of their profits on CSR activities.
Hopefully, in the days to come, the newly emerging tribe of Independent Directors would play a far more effective role in ensuring that more companies conduct their affairs with better attention to transparency, ethical standards, gender diversity, environment protection measures and socially relevant investments.