New delhi: Increasing scrutiny over the role and responsibilities of independent directors in the wake of events at Satyam Computer Services Ltd has led to a spate of resignations of such directors from boards. According to Directorsdatabase.com, 265 independent directors have resigned from 211 boards since January, when news of the scam at Satyam broke.
“This exodus began post-Satyam,” said N.K. Jain, chief executive at the Institute of Company Secretaries of India. “The immediate reaction is understandable as people feel uncomfortable in companies where the extent of transparency and disclosure is low and there is a compliance issue.”
Pre-emptive action: The Satyam office in Hyderabad. Since January, 265 independent directors have resigned from 211 boards. Bharath Sai / Mint
In early January, Satyam’s founder B. Ramalinga Raju disclosed that he had, over the years, fudged the company’s books to the tune of at least Rs7,136 crore. The company has since been sold to Tech Mahindra Ltd, the Central Bureau of Investigation is looking into the issue, and Raju and several other executives are in jail.
The reason for the exits is potential liabilities. “I have received several calls in the last 45 days from such people asking me for my insight into the companies on which they are on the boards, so that they can take pre-emptive action by resigning and not be caught napping later,” said Prithvi Haldea, managing director, Prime Database. Directorsdatabase is a joint initiative of Prime Database and the Bombay Stock Exchange. “They (directors) are now admitting in private that they are resigning from companies where they are not very comfortable,” Haldea added. Directorsdatabase couldn’t immediately provide data on the number of resignations in the corresponding period last year but Haldea said that number was “marginal”.
The exodus is being watched with concern by institutional investors. “It is a matter of great concern because there might be issues relating to corporate governance in the companies that they (the directors) were serving and are now resigning from,” said a senior official with a leading financial institution who spoke on condition on anonymity.