The appointment of independent directors (IDs) has its quota of practices that push the envelope.
Cases that stretch, if not breach, the spirit of corporate governance have been discussed in this column. The issues are recapitulated in brief.
A direct subversion of the concept of independence was designating a person as an ID, though the person had served on the board of the company for many years before the 2013 Act.
Next is the swapping of places within the same corporate group. A completes a 10-year term as an ID in company X, while B does it in company Y. The two exchange positions.
More egregious is the following: a person serves for several years as an executive director, even as a chairman and managing director.
Upon retirement, gets appointed as a non-executive, non-independent director for a three-year cooling-off period. And re-enters the board as an ID.
A milder variant of this is completing a full 10-year term as an ID, waiting out the three-year gap, and returning as an ID for another ten years.
Multiple appointments as ID in companies in the same corporate group.
Appointing a partner in a law firm, rendering services to the company.
An equally objectionable but a reversal of roles is an ID becoming an executive director—a practice where the regulator has applied the brakes.
While some institutional investors demur, these cases go through due to the shareholding of the promoters and the apathy of small public investors.
These practices create an impression of the non-availability of sufficient talent to find suitable candidates.
While not exactly falling into the above category of diluting independence, it is not out of place to touch upon the appointment of a busy industrialist or a business magnate as an ID.
Even in the era before the advent of ID in the regulations, icons in business and industry served as directors on the boards other than of their own companies. The boards that had such persons gained in public image.
But times have changed. The role of a director and especially that of an ID has become extremely onerous and time-consuming.
It is not suggested that business magnates are unsuitable for this role. They would add more value than mere professionals like consultants and lawyers.
Yet, these people tend to be part of a small social circle that breeds familiarity and thereby, the appearance of independence can be an issue.
Some of these appointees have their own firefighting to do in a highly volatile business environment.
These cases are mentioned only for the reason that they raise questions of true independence and not even remotely suggesting that there arise any questions on the competence of the persons.
However, the reason for writing this article is quite different.
Among the Indian conglomerates, Larsen & Toubro Ltd is a rare case, with no ostensible promoter or founder either in shareholding or management.
On 5 May 2026, its board, based on due recommendation by the NRC, appointed Vijay Sankar (DIN: 00007875) as a non-executive, independent director (additional director) of the company for a term of five years.
This appointment is effective 27 May 2026, up to and including 26 May 2031, subject to the approval of the shareholders of the company to be obtained in this regard.
Prima facie, there was nothing in this routine announcement to fish for any story. But something piqued one’s curiosity—the date being set, prospectively, 27th May!
Why did the company, which made effective the earlier appointment of two other IDs from 29 October 2025—the very date of the board meeting—choose in this case the death anniversary of Chacha Nehru?
A little peeling of the details showed that Narayanan Kumar, independent director, is retiring on 26th May.
Perhaps there was a design not to overlap any part of the tenure of the two.
Since there was little to suggest any risk of the total strength of the board getting breached, the only plausible answer was to avoid the ‘Chacha’ and the nephew being on the board at the same time, even if just for a few days!
Is this a unique instance of a succession to the post of ID by someone in the bloodline of the retiree?
Incidentally, the Chacha is the chair of the NRC (as per the FY2025 annual report).
At a time when internecine quarrels dog many business families, the camaraderie between close relatives should be toasted.
How unique is this case? It was not easy to find a parallel.
However, with some persistence, a case of two GenNext succeeding their respective progenitors could be located.
More could have been said, but only at the cost of the readers’ indifference to a prosaic subject, when the theatrics in TN politics are keeping everyone agog!
Why, when the world of politics is inviting new faces, does the corporate world wish to stay pristine?
(Ranganathan V is a CA and CS. He has over 45 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as a senior advisor post-retirement, handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
