The Hindu Business Line : SEBI chief warns against `professional' directors on boards

The SEBI Chairman, Mr M. Damodaran, said on Friday that the regulator intended to publish the names of those directors who have joined the boards as "professional directors" without meeting the norms.

By profession

Mr Damodaran said, "There are so-called professional directors on the boards now, not a Director (Finance) or Director (Materials) or Director (Human Resources), but men and women who have made it their profession to be directors on boards."

He urged companies to refrain from appointing such non-shareholder directors. Mr Damodaran made these observations, while inaugurating an orientation programme for company directors and other professionals on "New frontiers of corporate governance", organised by the National Law School of India University in collaboration with the National Foundation for Corporate Governance.

The SEBI Chief said that these people had joined the boards without owning a single share, but outlived the CEOs and even promoters by serving for too long without making any effective contribution to the company.

He said, "I don't mind if they are on a number of boards provided they read the papers, think about the issues and contribute effectively rather than get into a large number of boards.

"But, I certainly mind when these people get on boards and become permanent entities, more permanent than the furniture in the boardrooms".

Corporate governance

Noting that good corporate governance should first start at the board level, he said that companies should ensure appointment of good hands on the board and compensate them well.

"If you don't pay well, you don't get good directors, nor can you retain such people for long," he said.

Besides, to ensure good corporate governance, companies should have a proper evaluation process in place to rate the performance of the board members and ensure that only professionals be appointed as directorsnot those who make it a profession of becoming directors, he added.