Directors’ role on company boards has become more complex and demanding, especially for independent directors. Increasingly they have to monitor and manage diverse stakeholders’ interest, instead of being primarily focused on protecting shareholders‘ interests and expectations. With regard to banks, this was borne out when an independent director of Indusind Bank sought reappointment from shareholders. The reappointment, which had the support of the founders/promoters and the executive management, required the approval of 75% of voting shareholders.
On October 5, 2023, Indusind Bank shareholders rejected the re-appointment of Sanjay Asher, senior partner of the prestigious law firm Crawford Bayley and Company, as independent director. This development should send alarm bells ringing in India’s corporate world. What is noteworthy is that the shareholders’ rejection was not on the ground of any lack of competence on Asher’s part, but because the proxy advisory firms recommended his rejection. The proxy firms did so on the ground that, since Asher was a partner in a law firm, he was equivalent to a wholetime (executive) director there.
As per Securities and Exchange Board of India (SEBI) regulations, a wholetime director can be an independent director in a maximum of three listed companies. SEBI regulations further allow that independent directors have a maximum of seven directorships. Asher was on seven boards as an independent director. Hence not only was he conforming to SEBI regulations for independent directors, but he was also considered ‘fit and proper’ as per Reserve Bank of India (RBI) norms for directors.
Institutional Investor Advisory’s Services (IiAS) Recommendations on Indusind Bank’s Resolutions
Votes Polled by Indusind Bank’s Shareholders on the Resolutions
Interestingly, while Asher narrowly failed to get the required majority, as 26.8% of the shareholders rejected his reappointment, another independent director, whose reappointment the advisory firms had recommended against on similar grounds, was reappointed with 85.1% of the shareholders voting in her favour.
Indusind Bank’s Stakeholders Relationship Committee as on March 31, 2023
I, Hemindra Kishen Hazari, am a Securities and Exchange Board of India (SEBI) registered independent research analyst (Regd. No. INH000000594). Please see SEBI disclosure here. Investment in securities market are subject to market risks. Read all the related documents before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The securities quoted are for illustration only and are not recommendary. I own equity shares in Indusind Bank. Views expressed in this Insight accurately reflect my personal opinion about the referenced securities and issuers and/or other subject matter as appropriate. This Insight does not contain and is not based on any non-public, material information. To the best of my knowledge, the views expressed in this Insight comply with Indian law as well as applicable law in the country from which it is posted. I have not been commissioned to write this Insight or hold any specific opinion on the securities referenced therein. This Insight is for informational purposes only and is not intended to provide financial, investment or other professional advice. It should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.
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