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India to boost role of independents
New Delhi, 6 June 2003
Indian business is in the midst of a heated debate over new government proposals to strengthen the role of independent directors, including giving them majority power over the operation of audit committees.
The proposed changes would amend present corporate legislation to force companies to have at least seven directors, with more half of them being elected as independents. The definition of independent means that they cannot have any other business relationship with either the company, its beneficial owners, or a subsidiary.
The rule also applies to past employees so the practice of a retiring senior manager being ¢â‚¬Ëœkicked upstrairs' to join the board after retirement will be proscribed.
Independent directors cannot hold shares in any companies on whose boards they sit, a proposal that has come under fire from the Indian Chamber of Commerce, which has questioned why anyone would want the job if he has no vested interest in the company's success.
Those who have held consultancies or worked for a company as lawyers or auditors are also ruled out as independents.
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