The role of Independent Directors (IDs) is still debated, notwithstanding the fact that it has been a feature of the corporate landscape for around a decade. It remains an issue of significance for the success of good corporate governance. Recently, cases have been reported of ID recruitments taking place through a process that is indicative of opacity rather than transparency. In fact, it has been rightly observed that IDs in view of their stature and seniority should be “invited” and not “recruited”.
Promoter-led companies follow a simple process of the promoter himself looking at a few names, tossing them around informally with the Board and selecting the best through the normal process of NRC (Nomination and Remuneration Committee) and the Board. No interview as such happens since the credentials of the prospective candidates are well-established even before the process starts. Haziness is more to be seen in so-called multinational companies where everything revolves around a formal process. The worst thing that can happen in such a process is if, say, three out of four candidates who go through a four or five tier process of interaction-cum-interview do not make the cut for some reason or the other.
Failing to respond
Is it not the duty of the company to inform the candidates that they have not made it because of specific reasons, through a formal communication? There have been instances where the companies in question have just not bothered to respond on the outcome of the interactive/interview process. This is not to suggest that someone called for an ID selection process has a right to be taken in.
The issue is more one of showing the basic courtesy of a response. This is surely expected from seasoned corporates which have interviewed the prospective IDs. Some not so large companies have a clear policy that any candidate who steps into the company for any post for an interview and does not get selected gets a communication to that effect, and in quick time.
While some of these are basic classroom lessons, the fact is that we live in times that have diluted the behavioural aspect of governance in the quest of merely ticking the boxes. Are we now forcing regulators to step in and legislate basic behaviour and courtesy? One sincerely hopes that we have not reached that stage. It is up to the collective wisdom of the senior management team of a company to put in place a clear communication system, more so when candidates for senior positions are called and interviewed but not selected. The best run corporates are extremely sincere in conveying the bad news first. The good news will anyway find its own outlet.
This brings us to the next question of how corporates document the process of selecting IDs at the NRC meetings. Ideally, a comparative chart of the prospective candidates and a scoring model can serve as a scientific basis. Is this getting too bureaucratic? The answer is a clear “No” since the only way to justify the selection of the best candidate is through a documented process and proper minuting. Each company should also have an approved Board policy on the methodology adopted to select IDs. The policy should also enunciate the manner of communication to the candidates who did not get selected, which includes doing so in a reasonable time-frame.
The writer is a chartered accountant
