I had written Why Independent Directors are ineffective here sometime in May 2009.

Some time ago I read about Relics in Board rooms, where the types were categorized by a Prime Database study that classified in 4 broad types

75% Home directors - known personally to promoters - relatives, friends. Several loopholes exist in the Companies Act allowing their induction.

15% Value directors - people that either bring knowledge and expertise to the company - lawyers, technocrats etc. or provide it with a strong network.

5% Celebrity directors - inducted to add an aura of respectability & news value to the company including film stars, sportsmen etc.

5% PSU directors - typically appointed by political high command or ministers concerned, most are either politicians or bureaucrats.

So finally except 10-15% do Independent Directors really add value? And why does the Companies Act not get modified? Everyone I spoke to really had no answer.

According to the media & the highly qualified common man, the last month has been extremely bad for India, with inflation at a record high etc. etc. These articles, comments (most of them given by people who have no clue or at times by people who can only retain their job provided they comment) are mostly to be taken with a pinch of salt. Whilst there is some truth involved, some thoughts that occur to one that can be practiced maybe now or forever by businesses -

1 Remember what Sam Walton said: Trust your customers. Go talk to them, bad times or good times.

2 Ask yourself what you want to look like when recovery comes & start working towards the outcome. Read the rest of this entry »