K. Parthasarathi

THE proposal of the Petroleum Minister, Mr Mani Shakar Iyer, to appoint politicians as independent directors on the boards of public sector oil units would take away in one stroke whatever corporate governance these units had hitherto achieved. The Department of Public Enterprises Search Committee has rightly rejected the panel of candidates for appointment as independent directors, which includes mostly politicians.

Fortunately, public sector units (PSUs) have hitherto been spared of direct political interference in their working, except through the indirect control of the ministry. The current proposal to induct politicians on the boards will only sound the death knell of the better-managed units. Most politicians do not know the intricacies involved in managing companies. And even if some of them are competent, politicisation on party lines of the boards of PSUs is dangerous and should be avoided at any cost.

With energy requirements becoming critical and with efforts to make ONGC, IOC and other oil companies global, the last thing the boards of these companies would want is political colour. The need would be for talented people on the board to provide strategic direction to overcome competition and secure the energy needs of the country.

Independent directors are supposed to be the watchdogs, keeping an eye on the doings of the board and the happenings in the company. To help achieve this, the Irani Committee has proposed greater powers to independent directors.

They can "call for any information in exercise of due diligence, force dissent to be recorded, and even review the company's legal compliance independently."

Independent directors are expected to get actively involved in the running of the company. Can one expect politicians to engage themselves actively as members of audit committees, planning committees, and so on? One direct spin off would be that to the extent they occupy the boards, there will be a corresponding reduction in the number of genuine independent directors.

One cannot expect this proposal to evoke much dissent from other political parties, as they too would benefit when they are in power.

These `independent' (read political) directors would look for guidance from party bosses and could render board meetings ineffectual. In the process, shareholders' interest and the company's growth would take a beating.

(The author is a Chennai-based freelance writer.)

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