Satyam effect: 70 firms report director exit

Suresh P. Iyengar

Mumbai, Jan. 22 Even as the Government is finding it difficult to appoint a full-fledged Board of Directors for the troubled Satyam Computers Services, about 70 companies have reported that some of their directors, many of them independent ones, have resigned after the infamous Satyam episode.

Prominent independent directors who have relinquished their posts include Mr V.V. Ranganathan (Zee News Ltd), Mr Umesh Kumar Khaitan (Indo Rama Synthetics India), Mr S. Viswanathan (EID Parry India), Mr S. Balachandran (PTC India), Lt. Gen. R.S. Nagra (retd) (Empee Sugars & Chemicals), Mr S. Viswanathan (Coromandel Fertilisers), Mr Sanjeev Shah (Today’s Writing), Mr Dharampal Uppal (PBA Infrastructure), Dr M. Rammohan Rao (Bharat Electronics), Mr Somasekhar Sundaresan (Prime Focus) and Prof Krishna G. Palepu (Dr Reddy’s Labs).

Mr T.R. Prasad, (former Cabinet Secretary), who quit the Satyam board recently, has also resigned from TVS Motors, Nelcast, Taj GVK Hotels and GMR Infrastructure.

The independent director’s role is not very well defined and this could give rise to complications, said one of those who recently put in his papers.

“If an independent director has to check the bank balance of the company, the profit margin of different verticals and other financial aspects, then he will be playing the role of an auditor,” he said.

Analysts feel it will become increasingly difficult for companies to find suitable replacements within the six-month timeframe stipulated by the Securities and Exchange Board of India.

“Post the Satyam episode, celebrity directors will be more cautious in their approach and will do due diligence before signing up as independent directors,” said Mr Prithvi Haldia, Managing Director, Prime Database.

Mr D.R. Dogra, Deputy Managing Director, Care Ratings, said it was going to be difficult for companies to find credible replacements for the vacancies in the short term. More importantly, they have to ensure that unqualified people do not creep in.

“Compliance should come out of conviction and not by regulation. The infamous Satyam episode has now made financial officers and directors more diligent,” he said.

The Government has estimated that India Inc will require 3,000-4,000 independent directors within the next few months so that companies may comply with SEBI’s listing requirements. Over a period of time nearly 18,000 people would be required to work as independent directors in over 4,500 listed companies.

Efforts are on the establish an exclusive institute — Indian Institute of Independent Directors at Bangalore — to train independent directors; the proposal for such an institute, which is to be based on the public-private partnership model, is awaiting clearance from the Human Resources Ministry.