A Report on IOD Evening Workshop & Members’ Meet

The Institute of Directors (IOD), India, organised a Special Evening Workshop on May 10, 2024. The venue of the Conference was India International Centre, New Delhi. The theme of the workshop was 'Safeguarding Independent Directors: Due Diligence before Joining Boards'. The workshop was attended by around 150 participants, comprising industry and business leaders, board members, directors, policymakers, educationalists, and private as well as public sector institutions.

The 'Welcome Address' was delivered by:

Lt. Gen. Surinder Nath, PVSM, AVSM (Retd.)
President, Institute of Directors
Ex-Chairman, UPSC & Ex-Vice Chief of Army Staff
former Independent Director, L&T Board

Lt. Gen. Nath welcomed all the distinguished guests and participants. He spoke about the importance of having statutory Independent Directors in the Boards. He shared a few tips on how to be an Independent Director, i.e. to make yourself visible, exchange views in such business conferences and seminars, etc. He also highlighted the importance of being tech savvy, and have a good understanding of the applications of emerging technologies on business.

This was followed by a few introductory words by

Mr. Pradeep Chaturvedi, Vice President, Institute of Directors. He introduced all distinguished speakers of the session.

This was followed by the felicitation ceremony of Hon'ble Justice Uday U. Lalit and Hon'ble Justice Ritu Raj Awasthi as the Co-Chairman and Vice Chairman of the Institute of Directors, respectively, by Lt. Gen. Surinder Nath, PVSM, AVSM (Retd.), President, Institute of Directors

This was followed by the 'Guest of Honour Address' by:

1. Hon'ble Justice Uday U. Lalit
Co-Chairman, Institute of Directors
former Chief Justice of India

2. Hon'ble Justice Ritu Raj Awasthi
Vice-Chairman, Institute of Directors
Judicial Member, Lokpal of India
former Chairperson, Law Commission of India
former Chief Justice, Karnataka High Court

3. Hon'ble Mr. R. Venkataramani
Hon'ble Attorney General of India

Justice Lalit said that directors are the 'controlling minds and directing hands' of corporate entities, responsible for the business. He spoke about the responsibility of independent directors and said that professionals must come forward to take that kind of responsibility. He shared a Sanskrit shlok, “Anarambho hi karyanam pratham buddhilakshanam; Prarabdhasya antagamanam, dwitya buddhilakshanam” i.e. 'The first measure of intelligence is avoiding the start of an enterprise without assessing our skills, while the second is ensuring we complete what we begin'. He advised aspiring independent directors to know more about the pitfalls before they accept any responsibility. He connected the pitfalls associated with being an independent director with due diligence.

Justice Awasthi outlined the contribution and initiatives of IOD to the leadership cohort that understand the symbiotic relationship between responsible governance and economic prosperity. He shared that he has come across numerous instances of corporate disputes and interpretation that directly impact an organisation. He mentioned that the Institute of Directors enjoys a unique position and legacy due to its unparalleled and independent contribution to leadership issues and corporate governance. As organisations today have to shoulder the responsibility of being economically and socially viable, independent checks and balances are no longer a choice. Independent directors need to be empowered to be the steering voice for sustainability, environment viability and the voice of various stakeholders.

Mr. Venkataramani explained how everything about human activity is regulated by legal instruments. He emphasised the idea of 'duty of care and duty of loyalty' in the context of Independent Directors. He said that the term, 'Independent director' raises many questions - Independent from whom? Independent from what; and Independent in what literal sense? He suggested a book – 'Making sense in a changing world order' for business leaders. He said that society in the future will be very different from how it is today; and added that next-gen leaders of this technologically disrupted business landscape will be different and novel from the how they are today.

PANEL SESSION II:

To begin the session, Mr. Ashok Kapur, IAS (Retd.), Director General, Institute of Directors quoted Thomas Jefferson, the great US lawgiver and one of the main architects of the US bill of rights that first thought about the concept of a constitutional democracy in the USA in the 18th century. He said, “The great Lord Almighty has endowed man with three attributes, the right to life, the right to liberty and the right to happiness”. He added that it is at the root of human happiness – the rule of law and observance of legal constitutional norms by all in the society. It leads to happiness and prosperity for all not only in society, but also in the economy. He then introduced all the distinguished speakers of the second panel session

The 'Keynote Address' was delivered by:

Mr. Ajay Tyagi, IAS (Retd.)
former Chairman
Securities and Exchange Board of India (SEBI)

Mr. Tyagi spoke about the practical aspects and circumstances that today govern director level appointments in Indian boards. He said that firms look for various ways to circumvent the fixed tenures of independent directors. Many Indian firms appoint former employees, relatives of former independent directors, and service providers of the company as independent directors. He said that the regulatory framework for independent directors for listed companies is relatively better developed. He outlined a few salient features of the changes that have happened in the last few years regarding the role of independent directors. He also spoke about corporate governance in startups and mentioned that many-a-times, the interests of the venture capitalists themselves are not aligned with the future prospects of the startup. He explained that it is not impossible to come out with an exhaustive list of issues to be considered as part of due diligence to become an independent director. However, some of the points to be considered include: delay in declaring financial results, auditors or independent directors suddenly resigning without any valid reasons, any major regulatory action or legal case against the company as disclosed to a stock exchange, how diversified the board is with different skill sets, for how long the existing independent directors have been on a board, general reputation of encouraging free and frank discussions in promoter-driven companies, prima facie conflict of interest if any, etc. One positive indicator may be substantial investment by equity firms and mutual funds in the company. The examination of ESG is also one of the important parts of due diligence.

The 'Special Address' was delivered by:

1. Mr. Sanjay Shorey, ICLS
Director General of Corporate Affairs
Ministry of Corporate Affairs, Government of India

2. Dr. T. M. Bhasin
Independent Director on Multiple Boards
former Central Vigilance Commissioner
former Chairman & Managing Director, Indian

Mr. Shorey spoke about the importance of independent directors in boards. He said that independent directors are key pillars of the board, and play an important role in certifying documents of a company. He discussed the example of the Satyam case. He said that even though the position of an independent director may sound glamorous, and lucrative, it is quite challenging and means a lot of accountability. Independent directors should ask questions, and attempt to satisfy themselves, not the board. He added that even though independent directors are not considered custodians of a company, the moment company accounts are found to be fudged, the first people the regulators look at are independent directors. He stated, “Fraud vitiates everything”. He concluded by saying that independent directors have become increasingly important and accountable figures, and 'due diligence' is extremely crucial before joining any board.

Dr. Bhasin shared many examples from his long experience, and the transformative role he played at the Indian Bank. Being part of a public bank, he had to ensure that money goes to the right people, in the right quantum, and for the right purpose. He said that the Indian Bank has emerged as a self-sustainable bank without any capital support from the government. He mentioned that when banks analyse the funding of companies, they carefully assess the role of independent directors in the board, especially with regard to their influence in the boardroom and their examination of the balance sheet. He added by saying that independent directors are a kind of guardians of the company. He further shared that in his analysis of the top 100 frauds as part of his work at Central Vigilance Commission, he found that the role of the boards in the functioning of a corporate is very important. He concluded by saying that independent directors must safeguard not only their own interests, but the interest of the company and its stakeholders as well.

This was followed by a long interactive Q&A Session with the Audience.

The 'Concluding Remarks' and 'Vote of Thanks' were proposed by:

Mr. Manoj K. Raut
Chief Executive Officer & Secretary-General
Institute of Directors

Mr. Raut said that the last 10 years of IOD have been a momentous journey. He shared 5 key pillars of Good Corporate Governance - Board Chair, MD/CEO, Independent Directors, Compliance Officer, and the Audit Committee. He further summarized the requirements of an independent director which include, building a strong personal brand, being tech savvy, having domain expertise, developing familiarity with board functions, and being financially literate. He highlighted three main challenges that board members have to actively manage today- climate risks, cyber risks, and geopolitical risks. Mr. Raut thanked the special Guests of Honor, Hon'ble Justice Uday U. Lalit, Hon'ble Justice Ritu Raj Awasthi and Hon'ble Mr. R. Venkataramani for sparing their valuable time. He specially thanked Mr. Ajay Tyagi, IAS (Retd.), Mr. Sanjay Shorey, and Dr. T. M. Bhasin for sharing their expertise. He also thanked Mr. Inder Deep Singh Dhariwal, IA&AS, Joint Secretary, Ministry of Corporate Affairs, Govt. of India, Mr. D. D. Verma, Principal Advisor - Govt. Relations, Institute of Directors, former Secretary General, Rajya Sabha and Mr. Gopal K. Pillai, IAS former Secretary, Ministry of Home Affairs, Govt. of India for joining in the deliberations

He expressed gratitude to all the distinguished participants and members of IOD for attending the workshop, and thanked the authorities of the India International Centre (IIC) for the hospitality and arrangements.

IOD was especially grateful to its Event Partner, Oil India Limited.

This report is compiled by:

Mr. Ashok Kapur, IAS (Retd.)
Director General
Institute of Directors

&

Ms. Laghima Sharma
Assistant Executive Editor
Institute of Directors