Independent directors fight at the gate

ET INELLIGENCE GROUP: There are more candidates willing to join the boards of Indian companies as independent directors than there are seats available for them. According to data from Prime Database, there are currently 9,603 independent director seats occupied on the boards of 2,394 companies listed on the NSE. In contrast, there are 31,151 independent directors registered in the independent directors databank maintained by the Indian Institute of Corporate Affairs.

Of course, certain companies that are not listed or listed on exchanges other than the NSE, as well as those preparing to list, also need to appoint independent directors, but that number will be relatively small.

The increased visibility, accountability and remuneration of independent directors has led to a greater awareness of this strategic role in Indian companies. In addition, several factors have prompted more aspirants to register to be independent directors. This year’s big “board shake-up,” which involved the resignation of independent directors who were completing 10 years (two terms) on a company’s board, was expected to make way for new faces on boards. Secondly, it increased the need for independent women directors on boards.

Consequently, there has been a surge in training programmes for those seeking to become independent directors, offered by private institutions, business schools and consulting firms. Training programmes costing between ₹10,000 and a couple of lakhs are available to make aspiring executives “board ready”.

“There is definitely an oversupply,” said Vikesh Wallia, CEO of boardstewardship.com, a community platform for boards. “There is an oversupply of training programs. Also, there is no data from IICA and MCA on the number of independent directors required and the number of new directors appointed each year. In the absence of this data, many people sign up and join promising independent director training programs without doing due diligence on the demand scenario.”

The Independent Directors Database is a real-time repository of both existing and eligible and aspiring independent directors.

As of August 21, the database has 31,151 registered independent directors, of which 8,892 are women. There are 3,451 companies registered to access the database and 15,236 searches have been carried out by companies. To increase the searchability of the database, it is planned to open the database to executive search firms.

However, high numbers do not necessarily guarantee a greater supply of independent directors.

“Certification and qualification alone do not guarantee suitability or experience to serve as an independent director,” said Shweta Rao, director at Vahura OnBoard, which specialises in non-executive director searches. “Most companies look for independent board members with prior board experience and no conflicting roles, and typically prefer ex-bureaucrats, ex-senior executives and industry experts. As a result, there remains a shortfall in the supply of independent directors who meet these standards.”

Incidentally, the expected demand for new independent directors due to the “board shake-up” this year has not materialised as executive search firms had hoped. “The significant reshuffle at board level has seen many independent directors rotate within subsidiaries of the same group, minimising the need to bring in new or first-time board members,” Rao explained.