MUMBAI: Demand for independent directors is at a high fuelled by the New Companies Act and rules brought up the market regulator, and being the chairman’s friend isn’t anymore the most important qualification to get a call to fill up that position. Companies are increasingly looking to induct on board people who can add value to decision-making.
Estimates by firms that conduct board-level searches, such as Egon Zehnder, Korn Ferry and RGF Executive Search, suggest a 20-25% increase in demand for independent directors in the past six months.
“As of last March, a lot of people had to step down from boards because of the new Companies Act and Sebi regulation that limits the number of board seats you can have,” said Sunit Mehra, managing partner at executive search firm Hunt Partners. “This wave of demand will continue for a year as there are a lot of gaps due to positions becoming vacant that need to be filled.”
Under the 2014 Securities and Exchange Board of India guidelines, an independent director’s term is capped at five years, after which a special resolution by the company is required for the reappointment, which too can stretch to five years. After the two terms, there will be a cooling-off period of three years if the person wants to return to the board.
The New Companies Act allows a person to be on the board of 10 companies while Sebi has limited this to seven listed companies (three if serving as a whole-time director). So effectively, a person can be an independent director of seven listed companies and three unlisted ones. Many people were on the boards of more companies and they had to step down from some of the firms to conform to the rules.
Among the listed companies that have appointed independent directors this fiscal year are Wipro, Larsen & Toubro, DCM, Sanofi India, Hexaware Technologies, Grasim Industries, Bajaj Electricals, ITC and Lanco Infratech, according to data from PrimeDatabase.
There are a host of other companies in information technology, consumer goods, automobile, infrastructure, manufacturing and telecom that are looking for new professionals at the board level, search experts said.
“We have picked up more board members in the last four months than we did in eight-nine months of last fiscal (year). There are new board positions being created as companies become more aware of risk compliance, governance, etc,” said Navnit Singh, chairman of India for Korn/Ferry International, a leading executive search consultant
There is also an increasing realisation that investors are looking at companies with better corporate governance, and independent directors are expected to be the watchdogs to ensure good practices by the boards. This is driving companies to bring in people with impeccable records. “There is a corporate governance premium that is emerging or, in other words, companies with better corporate governance enjoy better prices in the stock market,” said Arun Duggal, chairman of local ratings firm ICRA and an experienced independent director.
Earlier independent directors used to be people who the promoters knew, but now companies are hiring search consultants to look for directors just like the way they do for any other appointments.
“There has been a movement towards (inducting) independent directors as companies are seeing the value of independent directors being more objective, and there is a serious capability matching. Earlier, it would be restricted to a select pool of people the board and the chairman knew,” said Govind Iyer, consultant at Egon Zehnder India
Companies are also looking at more international directors than before. As many businesses are moving global now, there is need for global expertise on board, he added.
Naina Lal Kidwai, former chairperson of HSBC India and an experienced independent director, earlier told ET that the searches were breaking beyond the old boys’ network and becoming more professional.
The shift is also in the competency skills that companies are looking for in board members. These are no longer restricted to the mandatory regulatory requirements — they want people who can contribute towards the strategic growth of companies. Independent directors now have to be from a specialised area in economic environment, bring in high levels of business and strategic skills, contribute in brainstorming and provide impetus to business of the company in specialised functional areas.
“Background in global finance is an important dimension emerging now for board member requirements,” said R Suresh, managing director of RGF Executive Search. “Companies are looking for people who are strategic and can be adviser to the CEO. There is also a great demand for people with M&A, private equity, investment banking and corporate strategy experience.”
A large part of the spurt in demand for independent directors this year is driven also by foreign companies that are privately held in India. These are European, American and Japanese companies who do not have mandatory board member requirements, but are getting people on board who can advise them on the Indian market, said Suresh.
RGF Executive Search is searching for five independent directors for companies with $2-3 billion market cap, he said.
Because of the greater awareness among companies about corporate governance, they are now open to proactive suggestions from search experts if they come up with a suitable candidate even when there is no vacancy. “I just showcased a highquality Indian talent to three large Indian companies … who were not proactively looking out for people, and all three were interested,” said Suresh.
Link of this article- http://economictimes.indiatimes.com/news/company/corporate-trends/independent-directors-are-back-in-demand-fuelled-by-the-new-companies-act/articleshow/54023950.cms
Being an independent director on a company board can be hard work, but the position is much sought after for the prestige it brings, as well as the promise of enhancement of professional skills and networks. These positions, while they do carry a legal liability, are also well paid, with annual earnings ranging from a few lakh rupees to over Rs.1 crore, which includes remuneration for attending board meetings, working on board committees, and a share of company profits.
Till a few years ago, however, independent directorships were the preserve of a select few. But things changed with the guidelines of the Securities and Exchange Board of India (Sebi) and the Companies Act, 2013. Clause 49 of Sebi’s listing agreement states that one person cannot be an independent director in more than seven public limited companies, and the Companies Act also limits the overall number of companies on whose boards an independent director can sit, listed and unlisted, to 10. Many independent directors who sat on multiple boards before the guidelines came into effect had to resign, opening up the field for a new set of people.
Hyderabad-based Jagannadham Thunuguntla, currently the head of research at financial services firm Karvy, believed the new law made it possible for him to work as an independent director. “I had spent years in the financial markets working with different industries, on fund-raising and on regulatory matters, and felt I had the experience to contribute to a company,” says the 34-year-old, who sought this position because he knew that an additional role as an independent director would help his career.
He signed up for the Directors Club, a specialized two-day training programme (Read below “Get Trained”), and spread the word that he was looking for directorship opportunities. Around the same time, independent of the programme, he joined the board of Responsive Industries Ltd, a Mumbai-based manufacturer of polyvinyl chlorides flooring and sheeting, as an independent director. The firm, with a turnover of around Rs.1,500 crore (2014-15), was looking for someone with financial expertise, and Thunuguntla fit the bill.
The duty roster
The Companies Act defines the independent director’s role as being one that can “balance the conflicting interest of the stakeholders” and bring “an independent judgement to bear on the Board’s deliberations, especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct”, among other things. “A good independent director needs to be one who will question, comment, analyse and be the devil’s advocate; one who understands his role and brings fairness and has the ability to examine different aspects of a proposal before it is taken up for decision,” says M. Damodaran, former Sebi chairman and founder of Excellence Enablers, a corporate governance advisory firm.
While becoming an independent director is great for career growth, the position comes with its set of responsibilities. “Good boards require that you spend at least three-five days in preparation for, and after, a board meeting. Doing a thorough review of the pre-reading material, discussion of minutes, meetings with management and other board members outside of board meetings is important,” says Mumbai-based Sunit Mehra, partner at the talent advisory firm Hunt Partners.
But spending time on a company board does give executives an edge. “It contributes to an executive’s growth in multiple ways. It helps you get a perspective which is non-operational. You understand how a board works and how management decisions may be perceived by stakeholders. All these experiences help you be a better manager,” says Mumbai-based Govind Iyer, partner at Egon Zehnder, a global talent management firm.
Several companies encourage members of their leadership teams, like chief executive officers and executive directors, and functional heads, like chief financial officers, to sit on at least one external board of a company that isn’t in the same field. “This is considered a good practice, as it gives the individual an inside perspective into the business issues of another company/industry and enables interactions with other high-profile and erudite people. And it helps when the individual is expected to take on more senior roles within the group,” says Mehra.
“For executives running the business, the broadness of outlook that comes with being part of another board is very important,” says Abanti Sankaranarayanan, Mumbai-based business head at United Spirits Ltd (USL), manufacturer of alcoholic beverages. At USL and its parent company Diageo India, senior executives are encouraged to take board positions. Sankaranarayanan sits on the board of retail chain Shoppers Stop. Anand Kripalu, USL’s managing director, is an independent board director at consumer goods Marico Industries. “You get to know other board members from diverse backgrounds and learn a lot from formal and informal interactions,” says Sankaranarayanan.
A good company board can have a fantastically diverse set of people. It’s been my best learning forum, says Mumbai-based chartered accountant Shailesh Haribhakti, who runs audit and advisory firm Haribhakti Desai Consultants India. Haribhakti spends a lot of his time on matters related to seven public limited companies in which he is an independent board director. Recently, he was in Delhi to attend the board meeting of a family-run firm. “At the meeting, the business strategy for the firm’s five different businesses was discussed in great detail. It was an illustration of the merit of what board members can contribute through their diversity, their experience, their ability to sense what is happening,” says Haribhakti.
Luis Miranda’s first brush with sitting on a company board came not as an independent director but as an investor. At private equity firm ChrysCapital, where Miranda worked from 2000-02, and then at private equity firm IDFC Alternatives, the employees were often nominated to sit on the boards of companies they invested in as nominee directors. From there on, it was the personal connect with different promoters and managements that led to his taking up board positions as independent director. “Having sat on company boards as an investor familiarized me with a lot of the standard aspects of being on a board,” says Miranda. Today, he serves as an independent director on four company boards, including those of technology research firm CSIR Tech, Singapore-headquartered SilverNeedle Hospitality, consulting firm Samhita Social Ventures and the GMR Group-owned sports franchise Delhi Daredevils. He spends 3-4 hours every week on matters involving these company boards.
Making your mark
Investors like Miranda, who have worked in private equity and sat on company boards, find themselves well prepared for the role of an independent director, but for other executives, training and networking are important.
Being an independent director is serious business. But if you find your employer unenthusiastic about the idea, try working with firms in an advisory capacity, says Purvi Sheth, Mumbai-based chief executive officer (CEO) at consulting firm Shilputsi. “In India, it may be a double-edged sword: While some employers perceive it as a sign of leadership ability, others might have concerns about timing and vested interests,” she says. Advisers can be more hands on, can have significant impact, and be a good sounding board to company CEOs.
If you do wish to be an independent director, however, you could join a specialized training programme to discover board-level opportunities. You can sign up with talent hunting firms such as Egon Zehnder, which also scout for board members.
Personal networking, however, remains the most accepted route. Reaching out to like-minded individuals who are already on boards and asking them to refer you is a good way to start. “You have to be very choosy about the kind of directorship you take on—don’t become an independent director just for name. It’s also risky to get into certain organizations that may have compliance issues,” says Sheth. Thunuguntla says he did due diligence before he agreed to join Responsive Industries. “I met the management and understood their business. I read all the financial statements, went through the profiles of the other independent directors and saw how long they had been associated with the job before accepting the role.”
Having a personal connect with the company can also be a deciding factor. Miranda says he has only worked with boards where he is comfortable. “There have been cases where independent directors have got involved not through any fault of theirs but because the company did something wrong. While the new Companies Act does give some protection to independent directors, you still may go through a lot of grief if there are any irregularities,” says Miranda.
So if you want to make an impact as a director, picking the right company board is important. “Go into a sector where you may have worked, or one you have a passion for,” suggests Egon Zehnder’s Govind Iyer, adding, Don’t just make a choice on the basis of the company’s market capitalization size.
Some programmes that can help you prepare to be an independent director
The Directors Club programme is held three-four times a year by talent advisory firm Hunt Partners, in collaboration with the SP Jain Institute of Management and Research and corporate advisory firm Board Evaluation Ltd, UK. It is a crash course on global best practices in corporate governance, understanding the duties of a non-executive and the behavioural skills required.
The Institute of Directors conducts a three-day Weekend Director Development cum Certification Programmes in Mumbai, Delhi, Bengaluru, Hyderabad and Chennai for directors and senior executives who wish to join the corporate board as well as for owner-managers.
Link of this article- http://www.livemint.com/Leisure/WonO0DcLZ76guzJwhdjDXL/The-outsiders.html
This past year, Ireena Vittal has been appointed to the boards of five Indian companies. The former partner at McKinsey is a director at Axis Bank, GlaxoSmithKline Consumer Healthcare, Wipro Limited, Godrej Consumer Products and Titan. She could probably get even more board memberships if she is so inclined.
With the new Companies Act mandating women’s representation on boards, companies are searching far and wide for good candidates.
Listed companies need to have at least one woman on their board, according to the law that was passed by the Lok Sabha in December. The deadline varies from one year to three years, depending on the size of the company.
But topflight women managers are having to turn down such offers because many just don’t have the time. Naina Lal Kidwai of HSBC, Kalpana Morparia of JPMorgan, Renuka Ramnath of Multiples Alternate Asset Management and Falguni Nayar of Nykaa.com are all busy running their own companies.
Kidwai, director at HSBC Asia-Pacific and country head of HSBC India besides heading Ficci, has been fielding various job offers.
Search Firms Flooded with Mandates from Top Cos to Comply with Law
“Yes, the requests are very much there. We still don’t have a large enough universe of women that can be drawn from for board positions,” she said. Kalpana Morparia, CEO of JPMorgan India, is independent director of Philip Morris International, CMC Ltd, Dr Reddy’s Laboratories and Bennett, Coleman and Co Ltd (BCCL), publisher of The Economic Times.
“On a generic basis, there is a greater demand among organisations to have women independent directors on board after the new Act,” she said. Some companies such as Wipro, which hasn’t had any women directors for the past three decades, or others like GlaxoSmithKline, which has never had one, have been prompt in complying with the law.
In the past five months, executive search firms have been flooded with mandates from top companies looking to comply with the law.
“There is a rush for well-qualified women board members. Organisations are looking for women directors who are experienced in board service, with the required domain or functional skill experience and with cultural compatibility with the company,” said Anjali Bansal, MD of SpencerStuart, who recently joined the board of GlaxoSmith-Kline Pharma. Bansal is being wooed by other company boards.
The rush is likely to intensify as companies have a limited pool to search from, said Suresh Raina, senior partner at Hunt Partners, an executive search and board advisory firm. It doesn’t help that top women bankers such as Chanda Kochhar and Shikha Sharma can’t be tapped — Reserve Bank of India doesn’t allow bank CEOs to be on boards of other companies except by rare special permission. Out of India’s top 100 listed companies, 34 don’t have any women directors, according to data from Indianboards. com, a joint initiative of Prime Database and National Stock Exchange.
“If one were to extend this to women independent directors, as many as 55 of them do not have one,” said Pranav Haldea, managing director, Prime Database Group. Demand for proven, independent women board members far outstrips supply.
The empowerment initiative by the government is aimed at giving women a stronger say in running companies and giving them more authority in a country that has failed to ensure their rights or safety, reflecting the mindset of a society obsessed with male progeny.
And, while companies are keen on fulfilling the letter of the law, there doesn’t seem to be much evidence they are making an effort to nurture talented women into positions of leadership.
“The response from the corporate sector right now is to try and get women who are already on boards or from family and friends. I am yet to see companies showing interest in taking women who do not have prior experience of serving on boards,” said Arun Duggal, chairman of Shriram Capital and a veteran international banker.
He estimates that 60% of BSE-500 companies will need to appoint a woman director. Against this demand for about 300 women directors, the current available pool of high-quality, experienced women directors is not more than 100, he estimated. Duggal is currently engaged in an exercise aimed at bridging this gap.
Nayar, former MD and CEO of Kotak Mahindra Capital Co, has set herself a limit of serving on three to four boards as she’s already actively leading a start-up. Nayar joined the Tata Motors board in May. “I am ready to be on multiple boards but I have an optimum number so that I can do justice to my role as an independent director,” she said.
Some companies in which an independent director’s term is coming to an end would rather fill the post with a woman board member. Raina of Hunt Partners said since high-profile candidates have their hands full, many of them are using the opportunity to churn their board ‘portfolio’.
Link of this article- http://articles.economictimes.indiatimes.com/2013-10-28/news/43462675_1_women-directors-hsbc-india-independent-directors
As many as 40 power projects are stuck for lack of environmental and forest clearances, of which 30 projects are worth Rs 1.5-2 lakh cr
In a backdrop of stuck projects and the need to get these going and generate cash, power companies are busy hunting for good talent at the top.
Essar Power is expanding its capacity and has made appointments of managing directors (MDs) in Jharkhand, Madhya Pradesh and Gujarat. Monnet Power and Lalitpur Power Generation Co, Bajaj Group, have appointed new chief executive officers (CEOs) in the recent past.
Power projects have been hit by delays in environmental and forest clearances. As many as 40 are stuck for lack of such approvals, of which 30 projects are worth a combined Rs 1.5-2 lakh crore. Three projects of Essar, in MP, Gujarat and Jharkhand, involving 4,800 Mw, are yet to take off.
KVB Reddy, executive director, Essar Power, said: “At a time when we are planning to take our power generation capacity to 6,700 Mw from about 4,000 Mw currently, we are inducting industry veterans to head each of our generating and under-implementation assets. This will enable us to provide each asset with a dedicated management team, focused on execution of projects, operational efficiency and maximising of returns.”
In the recent past, Essar Power has made appointed Ramesh Kumar (former chief operations officer of KSK Energy Ventures) as MD for Essar Power Gujarat Ltd. Vishwaroop Lal, former CEO of NTPC Alstom Services, was hired as CEO of Essar Power ROE Assets. Vinay Mittal, ex-CEO of Monnet Power, was hired as CEO of Essar Power MP Ltd.
“Each MD, supported by a dedicated management team, will operate each asset (company) like an independent company, making them more agile and competitive,” Essar’s Reddy said.
Monnet Power Company, a wholly owned subsidiary of Monnet Ispat & Energy, expects to commission the first 525 Mw unit of its 1,050 Mw coal-based power plant in Odisha by next month. It has appointed Vijay Gupta, with 35 years of experience at places such as Tata, NTPC and Shravanthi Infratech, as its CEO. Monnet Ispat has invested Rs 4,000 crore and will be investing another Rs 1,500 crore on this project, according to news reports.
Another major, Jindal Power Ltd, implementing an expansion project of 2,400 Mw (4×600 Mw), is also strengthening the team with more top-level recruitments. A JPL spokesperson said, “JPL is also in the process of developing a team of competent professionals at middle age for managing its projects.”
According to Suresh Raina, senior partner, Hunt Partners, a leading headhunting firm, under the circumstances such as insufficient coal linkages, lack of cash flow from state utilities and loan dues, a big factor is finding the people who can make the projects happen. “In this backdrop, people who have decades of experience in project execution and technology experts who can increase the efficiency of the plants to deliver the highest PLF (utilisation), corporate affairs experts who can work with government departments and regulators to get clearances, are in high demand for the key positions.”
In the projects commissioned, companies want to get these working at 100 per cent capacity so that they can start generating the cash, he added.
Bajaj Group, which has made a foray into thermal power generation through Lalitpur Power Generation Co Ltd (LPGCL), a special purpose vehicle of Bajaj Hindusthan, appointed
K J Varkey as CEO in February 2013. LPGCL’s 1,980 Mw (3×660) power project in UP is expected to be commissioned by the end of 2014.
Varkey worked as COO at the Lanco Group for setting up a 1,320 Mw plant at Wardha; at JSW Energy, he headed an SPV of a 4×300 Mw project in Ratnagiri.
Link of this article- http://www.business-standard.com/article/companies/with-projects-stuck-loan-burden-power-majors-hunt-for-top-talent-113081900905_1.html
Train of Talent: Employees with requisite talent are back in demand, thanks to the revival of the job market. Fresh investments in infrastructure and power, and increase in defence expenditure are likely to open a plethora of opportunities, according to leading placement firms. ET speaks to talent watchers to find out more
K Sudarshan Managing Partner- India & regional VP – Asia, EMA Partners International
Talent at a Premium
There is a severe shortage in the infrastructure space. I am looking at mandates of 6 CEOs in power and roads, among others. There is demand for project directors and CFOs in this sector. However, there is a need for depth of talent, but companies want these posts fi lled up immediately.
The firms have to pay a lot of premium for these senior posts. However, on the fl ip side, candidates will start holding multiple job offers and existing employers will try to retain their employees more. We saw it in large numbers in 2005-06 and this will make
Aditya Narayan Mishra President – Staffing, Randstad India
Infra, Banking Hiring
Right now, there will be a lot of hiring in infrastructure, banking and other fi nancial sectors. With theeconomy looking up, a change in consumer pattern will continue to push growth of e-tailing companies. The main hiring for us is taking place in the middle management segment and there will be more demand coming in for this group.
Salary-wise, there will not be any huge jump, but we have noticed counter offers coming in. The last time we saw this was 2007-08 where candidates would shop around for offers. There is a lot of optimism now in the markets.
TS Krishna Kumar COO, IKYA Human Capital Solutions
Temp Hiring Goes Up
Companies will go aggressive on variabilising the workforce – which means companies will retain or marginally increase core/niche employees and increase variable employee strength. For example, skills such as domain experts, architects, high-end designers and project managers with specifi c skills will be retained.
Temporary workforce hiring may go up, especially in sectors such as retail, consumer care and infrastructure. Infrastructure will have to receive a fillip by the new government. Thus, hiring here will witness a surge.
Industries such as manufacturing will also witness a significant jump in hiring, but only in the second quarter. As the job market revives, senior management hiring will also start gaining momentum. With increasing foreign funds inflows expected, hiring for finance managers, fund managers and financial analysts is likely to go up.
Suresh Raina Senior partner, Hunt Partners
Project Heads in Demand
In infrastructure, the paralysis that had set in will take some time to go, but it will be one of the sectors that will see a large bounce, especially for talent who can hit the ground running. Last 18-24 months have seen almost an exodus of good quality talent from this sector and it will need a lot of back fill. Business heads, project heads will be in high demand.
Engineering and capital goods will see a positive impact, but will be a little slow to take off. There will be demand for senior professionals who can lead engineering and development functions at large Indian companies. This will be met by expat talent.
Also, Indian businesses that have expanded their operations to geographies outside India will need senior Indian talent. IT product and e-commerce companies need leadership talent as they need senior business heads who can manage the growth and the increased scale, along with the geographical spread.
Link of this article- http://articles.economictimes.indiatimes.com/2014-06-13/news/50564668_1_job-market-infrastructure-multiple-job-offers
With a perceived shortage of capable independent directors (IDs), in the backdrop of the new companies Bill, corporate giants are encouraging initiatives from organisations to train executives in this regard.
The recent training-cum-certification programme by the UK-based Board Alliances Limited and the SP Jain Institute of Management and Research, Mumbai, along with KPMG and Hunt Partners, has seen participation from corporate groups such as Piramal, HDFC, Knight Frank and Tata Steel.
Nitin Kini, partner at KPMG India, said: “At present, India Inc is facing a shortage of ‘truly independent’ directors and this situation is expected to worsen with the new Companies Bill becoming an Act. An initiative is necessary to create a pool of high quality IDs from which nomination committees and promoters would have a choice to select talent for their boards.”
“Starting from the requirement to have a minimum required number of IDs on a Board and specifically examining the independence of IDs, the Companies Bill 2012 has tried to cover a lot of ground,” said Suresh Raina of Hunt Partners. In the new law, at least a third of the board should comprise of IDs.
For building capable IDs, the courses referred to have a focus on familiarisation with global best practices in corporate governance, understanding the liabilities and duties of a non-executive and knowledge of behavioral skills required to better manage boardroom conflicts.
Pranab Datta, chairman at Knight Frank India, who has participated in the course, said: “Directors on boards have a huge responsibility thrust on them and such courses can be enlightening in better appreciation of that responsibility and discharging it.”
The Companies Bill asked for promoting gender diversity by specifying induction of a minimum number of women directors, limiting the tenure of an ID to a maximum of two tenures of five consecutive years, with a cooling- off period of three years between the two tenures. The bill also demands a data bank of IDs and the need for their training, to enhance the pool of those eligible and qualified.
Datta added, “The old boys’ club of boards will soon be on its way out, particularly for companies that believe in augmenting shareholder value.”
Sudha Ravi, chief executive officer, PHL Finance, the non-bank finance arm of the Piramal Group, said, “With the fast growth in the economy, businesses have expanded considerably, increasing the role and responsibilities of IDs. So, there is a need for various initiatives to help IDs with knowledge across sectors and to update the latest regulatory developments.”
According to the Bill, a person cannot become a director in more than 20 companies and not in more than 10 public ones.