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VIGNETTES-INDEPENDENT DIRECTORS

JOINING A BOARD
Gaurav Hatikhande, a professor from an IIM, became, after his retirement, a sought-
after person for the position of independent director. His pre-condition was that the
company should pay Rs. 1,00,000 per meeting and also pay commission on profits.
Moreover, he would insist that he be made a member of every single committee of the
board, obviously with the objective of enhancing his remuneration. He became an
independent director on the board of 3 companies.

Achal Patankar retired as the chairman of a very large PSU and was in high demand by
the corporate sector for the position of independent director. The conditions he put on
Xtrar Aluminium Ltd., a very large private sector company who was the first to approach
him, was that he should be provided with a 4-bedroom house in South Delhi (which the
company can show as a company guest house), a full time car with chauffer and a full-
time domestic help. His conditions wre accepted and he was inducted on the board.

Hira Ranu, a retired MD of a large private sector pharma company, joined the board of
Xinxen Pharma Ltd. a company which was running in losses and Hira was inducted for
helping a turn-around primarily as he was from the same industry. Hira wanted more
than the sitting fees. An arrangement was made under which large sums of monies were
paid by the promoter from his private accounts to an NGO run by Hira’s spouse.

Onkar Nath Puri, a mining expert, joined the board of Tripu Mines Ltd., a mining
company, only because the company had a subsidiary in Singapore. He insisted that he
should be placed on the board of the Singapore subsidiary, as it would give him an
opportunity to travel often to Singapore, where his son was working, and that the
director’s fee be paid to him in Singapore Dollars. His request was complied with.

Shriram Chengappa, after retirement from the telecom branch of the defence forces,
when joining any company as an independent director, would put a condition that the
sitting fees should be only Rs. 10,000 per meeting and no commission on profits be paid,
and that the balance of the sitting fees and the commission on profits be paid to him in
cash. The reason cited by him in private was that he did not want to pay any taxes on his
income and wanted most of the sitting fees and the entire commission to fully accrue as
net to him. He was able to find two such companies.

Rama Kohli retired as the chairperson of a PSU bank. When the law for women directors
was promulgated, Rama was sought after by several companies and HR agencies. The only
condition she put was that the annual remuneration from each company should be a
minimum of Rs. 15 lakhs. She joined 4 “compliant” companies thereafter.
Hitesh Agarwal, a retired chairman of a PSU bank, joined Vichitray Steels Ltd. as an
independent director. This company used to pay a reasonable sitting fees and also would
share up to one per cent of its profits with the independent directors. Two years later, the
industry faced bad times and the company went into losses. Unable now to pay the
commission, the promoter of the company, in one of the board meetings, presented all
the independent directors with an elegant briefcase. What the briefcase contained was
wads of notes aggregating Rs. 20 lakhs. On being asked about this, the promoter said that
this was in lieu of the commission that the company was not able to pay.

Ram C. Banerjee, a high-profile Delhi-based bureaucrat, after retirement made it known


to the relevant people that he would prefer to accept a board position preferably if the
company was based in Hyderabad. The underlying reason was that his daughter had
relocated to Hyderabad after her marriage and this would thus give him the opportunity
to visit his daughter and his grandchildren every now and then, and at least once every
quarter. He managed to get on the board of a Hyderabad-based company.

Naresh Srivastava, the promoter of Nena Physique Ltd., a listed company manufacturing
health equipment, was worried about the potential non-compliance of the requirement of
half his board to be independent directors, when this regulation was first enacted in 2005.
While reclassifying some his existing board members as independent as they complied
with the conditions of independence, he was still one person short. Literally making
mockery of law, which does not even now prescribe any qualifications or experience, he
appointed Ram Lal, his old family barber to the board. This was at a time when there
were no public disclosures about the board members. Faced with the question as to how
he would justify the induction of Ram Lal in the notice of AGM to the shareholders, he
was innovative at his best by describing him as a “personality development expert” with
over 30 years’ experience.

Ramesh Kumar, a very renowned government servant, upon retirement, joined the
board of Sigma IT Ltd, a company with offices across the world, on the condition that the
company shall need to give employment to his son who was in the USA that time, and
was looking for a change. The condition also specified a more-than-normal remuneration,
a small apartment and a car for his son. Within a year, Ramesh also persuaded the
company to hold its annual offsite meeting in the US, along with the spouses of the
directors, obviously so that Ramesh and his wife could get an opportunity to spend some
time with their son.

LEAVING A BOARD

Pankaj Chaturvedi, a renowned economist, was much in demand as an independent


director. He joined nearly 20 companies. When the law on cap of number of companies
was announced, he had to give up several directorships. Before doing so, he consulted a
market expert to advise which of these 20 companies were not high on corporate
governance. The expert retorted that it was Pankaj who should rather tell him about that
as he was on the boards of these companies! Pankaj finally retained only the high-paying
companies! Much later, he had to bite the dust as two of these companies were found to
be involved in major frauds.

Shiv Dutta, a Delhi resident, joined the board of Heavens Airlines Ltd, a high-profile
company based in Chennai. For nearly two years, he enjoyed this position, as it not only
paid very handsomely, but also would hold board and committee meetings at exotic
locations, including abroad. With the downturn in the industry, the company faced
defaults in its payments of interest on loans. Shiv, on the very first instance of this
default, left the board citing very poor health as the reason. However, within a month,
Shiv joined the board of another company based in Chennai itself!

Sita Kumari, a retired regulator, joined the board of Pavitra Transports Ltd., a large
logistics company, She was also made the Chairman of the company’s nomination and
remuneration committee. When the position of an independent director fell vacant, she
took up the job seriously of finding a suitable replacement. After running the whole
process, she was appalled to get a call from the promoter recommending one of his
friends, who was not even in the fray, and who was also not competent, for the position.
When a similar situation repeated, she realized that the NRC was a farce. She resigned
without citing any reason.

Ram Kanwar, after retiring from the civil services, joined Braking Industries Ltd. as an
independent director. He was a person of repute with outstanding track record in public
service, but had no knowledge of corporate matters or the relevant industry. He
demanded an extensive orientation course and one-on-one detailed interaction with
heads of all departments, which was provided to him, though reluctantly. During this, he
realized that the governance standards in the company were very low. Feeling
uncomfortable, he resigned within 3 months, citing reason as preoccupation.

Jitendra K., joined Rexota Co. Ltd. as an independent director as he was invited by the
promoter of the company who had known him from college days. Jitender was also made
a member of the audit committee of the board. Within 10 months of joining, Jitendra
tendered his resignation, citing personal reasons. He confided to his friends that he
resigned from the board the very day the statutory auditors resigned. This, according to
him, was a signal of something amiss, and he did not want his name to be sullied later on.
It is another matter that Jitendra little realized then that he was still accountable for any
“misdeeds” while he was on the company’s board.

Suresh Athavale, a retired bureaucrat, joined the board of Richard Cosmos Ltd., a large
MNC. Just prior to his first board meeting, he got a call from the promoter regarding two
agenda items, with a request that the promoter would explain these items in a one-on-
one meeting, and the agenda be approved without any debate in the board meeting.
Suresh found this strange but accepted. He then found the same practice being repeated
in the next few meetings. Not sure whether he was approving the, difficult agenda items
without a full understanding, he opted to resign from the board, citing preoccupation as
the reason.

Mr. Praveen Mazumdar, a practicing Chartered Accountant, joined the board of Sunati
Learning Ltd, a large educational institution. Once, to understand the rationale and
nuances of a particular agenda item, he thought it prudent to talk to the CFO of the
company directly. He then brought this additional knowledge to the board meeting. The
promoter was obviously taken aback and subsequently found that the CFO had been a
party to this. The CFO was privately admonished by him for this. The next time Praveen
called the CFO, he regretted. Praveen was aghast to know that this was because of the
promoter. He resigned from the board, citing health as the reason

Shyama Haider, retired as the chairman of Bixit Pharma Ltd., a very large pharma
company. She was invited to the board of All-Ind Drugs Ltd., another pharma company,
as an independent director. In the first few meetings she attended, she realized that the
meetings were just a formality, with the entire agenda getting over in less than an hour.
Even during that period and beyond, till lunch, there were lots of jokes, light conversation
and sexist remarks being made by some of the board members. She resigned from the
board in about six months, citing personal reasons.

N. Alexander, a retired senior Income Tax official, after retirement, joined within one
year as an independent director of as many companies as allowed by law. Incidentally,
most of these companies had income tax notices/litigations. When he got an invite from
yet another company, he first resigned from one of the existing companies and then
accepted the new offer. The reason cited for the resignation was personal. The real reason
was that the total remuneration offered by the new company was significantly higher
than from the company from which he resigned which paid him the lowest.

Anil Kumra, a retired senior police officer, joined the board of Prism Security Ltd., a
large security company. He was able to contribute significantly to the company’s affairs
after joining the board. The company later got into the real estate business with heavy
borrowings. With the formulation of new regulations, the real estate business took a big
hit, impacting the cash flows. As soon as the rating agencies started discussions with the
company about a possible downgrade, Anil resigned from the board, citing preoccupation
as a reason.

Kumar Dandiya retired as the chairman of a major regulatory body. After the cooling off
period, he was inundated with offers to join listed companies as an independent director.
Although his main criterion was the size and public image of the company, he was equally
concerned about the remuneration and location. He joined the boards of 5 companies.
On the day when there was an income tax raid and cash seizure in one of these
companies, Kumar resigned the same day citing preoccupation as a reason.

Neil Saxena, a senior film actor, joined the boards of two companies. Within 6 months,
he resigned from one of these companies citing personal reasons. The real reason was
that his demand for business class travel, a suite in the hotel, free meals in restaurants of
his choice and a luxury car (all of these much beyond the meeting dates), was not being
met by the company.

Diya Kohli retired as the managing director from a large hotel chain, and was soon
invited to the board of a mid-sized hotels company. She was very excited to be of some
value to this company. She soon realized that she was inducted only for namesake. To her
surprise, she found that the minutes of the board meetings were very different from what
was discussed in the meetings, and many a times different from the views expresses by
her. She resigned from the board, citing personal reasons.

Sansar Chandra, a retired senior doctor from TAIMS, joined the board of Tech-bio Ltd.,
a leading biotech firm. He was also inducted into 4 committees of the board. To his
surprise, he found that the meetings of the 4 committees were scheduled between 10:00
am to 12:00 noon, followed by the board meeting, which lasted for just one and a half
hours, followed by lunch. The same schedule was repeated the next quarter. When he
objected, he was told that several other members of the board were very busy people who
had other commitments. He realized that all these meetings were just a formality, and
that his induction on the board was only for him to open the doors to some relevant
departments of the government. He resigned from the board, citing personal reasons.

Subhash Katiwal, a retired senior space scientist, was delighted to be invited to the
board of Misu-son Tech Ltd., a large technology company. He found it a great learning
experience. He was later made the chairman of the company’s CSR Committee. Over the
next few months he, however, realized that the CSR funds were being doled out to ‘fake’
projects run by the promoter’s friends and worse, there were kickbacks involved in these
assignments. He resigned from the board without citing any reason.

Rajeshwar Singh, a retired professor from a reputed university, became an independent


director of T-Top Industries Ltd., a mid-sized polyester company. He was overwhelmed
by the size of the agenda papers of his first board meeting, running into over 500 pages. It
was a tedious task to go through and understand all the agenda items, and he gave up
mid-way. During the meeting, he found that only half the agenda items could be taken up
for discussion in the time allocated for the board meeting. The meeting concluded with
the Chairman announcing that all other items can be taken as read. Over the year,
Rajeshwar realized that the initial agenda items were mainly routine items, with
unnecessary annexures and explanations and the key items were placed later in the
agenda. He just continued to live with the situation and finally resigned after two years,
citing personal reasons.