The Securities and Exchange Board of India (SEBI)
committee on corporate governance has recommended doing
away with the practice of appointing nominee directors
by financial institutions on the board of companies.
committee, headed by N R Narayana Murthy, chairman and
chief mentor of Infosys, said if an institution wishes
to appoint a director on the board of a company, it should
be approved by the shareholders of the company. Such directors
shall not be considered as independent directors.
institutional director, so appointed, shall have the same
responsibilities and shall be subject to the same liabilities
as any other director. The nominee of the government on
public sector companies shall be similarly elected and
shall be subject to the same responsibilities and liabilities
as other directors, the committee recommended in its
rationale to do away with the nominee directors position
follows the committees view that the institution of nominee
directors creates a conflict of interest that should be
avoided. Such directors often claim that they are answerable
only to the institutions they represent and take no responsibility
for the companys management or fiduciary responsibility
to other shareholders.
is necessary that all directors, whether representing
institutions or otherwise, should have the same responsibilities
and liabilities, the report said. The committee recommended
that companies should lay down a code of conduct for all
the board members and the senior management of company.