Non-executive directors are puzzled by the central government’s decision to introduce a qualifying exam for independent members of company boards. The Indian Institute of Corporate Affairs (IICA), Haryana, is to hold the exam starting in December and 60% is the qualifying mark. Further, all listed companies have been asked to disclose each independent director’s test result in their annual reports. The proposal has raised concern that this could provide fodder for activist shareholders.
Some critics of the move have said that this could shrink the pool of available people while others said it may not necessarily achieve the goal of improved corporate governance.
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Until now, companies weren’t required to choose independent directors from a database maintained by the Ministry of Corporate Affairs (MCA). However, going forward all those chosen for the post will have to be registered with the database and should have cleared the IICA test.
Source: Economic Times
