HOW BIG BUSINESS GROUPS ARE AVOIDING THE APPOINTMENT OF INDEPENDENT DIRE...

HOW BIG BUSINESS GROUPS ARE AVOIDING THE APPOINTMENT OF
INDEPENDENT DIRECTORS IN THEIR  BOARD.

EXCHANGE OF Independent directors BY MAHINDRA & MAHINDRA
FROM OTHER BUSINESS GROUPS MAINLY TO AVOID APPOINTMENT OF STRANGERS AS
INDEPENDENT DIRECTORS

Mahindra & Mahindra Ltd. is an India-based mobility
products and farm solutions provider. The Company’s segments include
Automotive, Farm Equipment, Financial Services, Real Estate, Hospitality and
Others.

Mahindra and Mahindra has appointed Nisaba Godrej and
Muthiah Murugappan as Independent and Non-Executive) on the Board of Directors
of the Company, with effect from August 8, 2020 for a period of five years. The
company issued a notification on the matter to the stock exchanges.

Godrej, chairperson and managing director of Godrej Consumer
Products, has been a key architect of GCPL’s strategy and transformation in the
last decade. During this period, GCPL’s market capitalisation has risen
twenty-fold. A BSC graduate from the Wharton School at the University of
Pennsylvania and an MBA from Harvard Business School, Godrej is passionate
about girls' education, the human mind, trekking and equestrian sports.

M&M’s board also approved the appointment of Murugappan
as an Additional Director (Independent and Non-Executive) on the Board for five
years with effect from 8th August, 2020.

The concept of ID is undergoing a change beyond the
imagination of the lawmakers. Exchange of ID positions among unrelated
promoters / their families , a great idea.

What is the purpose of the 
Directors DataBank created by MCA ?

This shows that Companies may not prefer to take an
unfamiliar person onto their board. MCA’s Databank  of Independent Directors is only ornamental.

It will take time for companies to change way of working.

While change is certain it will be resisted and only when
inevitable or some genuine IDs show talent will it catch on.

This move has indicated that MCA may consider looking at
modifying eligibility criteria. There should be a ban on appointment of IDs
from other business groups  or
inter-change of directors as IDSs .

The above move is going to shatter the concept of
independent director appointment in listed companies compulsorily and the top
business houses are now going to use this loophole declining  to appoint strangers as Independent directors
in their board ?

The loophole is very big so as to shatter the concept of
Independent Directors in India.

Will the MCA come forward to plug this loophole?