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For better corporate governance `Independent directors must serve on fewer boards'

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Mr Pramod Bhasin , President & CEO, GECIS Global, addressing CII members in the Capital on Thursday. Kamal Narang
Mr Pramod Bhasin , President & CEO, GECIS Global, addressing CII members in the Capital on Thursday. Kamal Narang

Our Bureau

New Delhi, Sept. 22

GOOD corporate governance has become imperative in the light of new laws in the US and the UK, with whom a lot of Indian companies do business, said Mr Pramod Bhasin, President and Chief Executive Officer (CEO), GECIS Global, at the Confederation of Indian Industry Governance Series `What the Boards Would be Facing in the Coming Years: Challenges and Solutions' on Thursday.

However, this was getting increasingly difficult to impart because of the need for independent directors on company boards, said Mr Bhasin. "Liability factors make it difficult to get good independent directors as they can face criminal charges for certain decisions," he added. The more independent the director, the less he or she was likely to understand the business of the company.

Suggesting a solution, Mr Bhasin said independent directors needed to serve on fewer boards in order to grasp the businesses of the companies concerned. Each independent director could be given the responsibility to understand one aspect of the company such as human resources, sales, marketing or purchases.

Good corporate governance was needed now more than ever to meet legal requirements, win confidence of shareholders on a sustainable basis and comply with the applicable laws of the land, he said. The media acted as a strict watchdog and there was greater public scrutiny following the exposes in Enron, Tyco, Worldcom and AIG, he added.

Company directors also needed more and better sources of information on the company to take better-informed decisions. These should be in addition to presentations that the CEO or the Chief Financial Officer made to the board, said Mr Bhasin. "Directors should interact with other senior management and staff in their chosen area of interest to get a better understanding of the company."

As time for board meetings was limited, better information would enable the boards to take better and more strategic decisions at their quarterly or six-monthly meetings, said Mr Bhasin.

(This article was published in the Business Line print edition dated September 23, 2005)
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