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Source: media reports

Independent directors may not be allowed Esops

Independent directors may not be allowed Esops
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First Published: Tue, Aug 04 2009. 12 37 AM IST
Updated: Tue, Aug 04 2009. 12 37 AM IST
New Delhi: Independent directors on company boards may be barred from accepting employee stock options (Esops) and performance-linked incentives under proposals by the ministry of corporate affairs following the scam at Satyam Computer Services Ltd.
The role of independent governors has come in for close scrutiny in the Companies Bill, 2009, which was tabled in Parliament on Monday. The bill seeks to replace the 53-year-old Companies Act and strengthen corporate governance standards. The new Bill will now go to a Parliamentary Standing Committee before it can be taken up for discussion, most probably in the winter session of Parliament.
The ministry of corporate affairs will recommend to the standing committee that independent directors be barred from receiving Esops or performance incentives from companies on whose boards they serve, people at the ministry familiar with the development said. Such measures would help ensure that independent directors remain impartial, the people said.
Satyam Computer Services founder-chairman B. Ramalinga Raju in January confessed to misstating company accounts to the tune of Rs7,136 crore over several years, triggering India’s biggest corporate fraud inquiry. The company has since been bought by Tech Mahindra Ltd.
The role of independent directors came under scrutiny following the scam. The Companies Bill, 2009, seeks to plug the loopholes that can be exploited by unscrupulous managements. Insider trading by key managerial personnel will now be a criminal offence and shareholders will be allowed to take part in class action lawsuits.
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First Published: Tue, Aug 04 2009. 12 37 AM IST