The directors of the superseded IL&FS board, including the independent directors, should resign from boards of other companies as well for failing in their fiduciary duty while on the board of IL&FS, says a leading proxy advisory firm.
“These directors failed to conduct their fiduciary duty in public interest at IL&FS board, so they are unfit to continue as directors in the boards of other firms,” Anil Singhvi, founder and non-executive director of proxy advisory firm Institutional Investor Advisory Services (IiAS), said.
Bigger than Satyam
“IL&FS case is bigger than Satyam and like Satyam directors, they all should resign or should be asked to resign from boards of all companies. You are caught napping, so just bow your head and go home,” he said.
However, heads of two other proxy advisory firms said it would be up to the boards of other companies to decide.
J.N. Gupta, MD, Stakeholders Empowerment Services, said: “It is for the respective boards of companies to decide whether to continue and drop the said individuals [who were on the IL&FS board] .”
“As per the law, any disqualified director has to resign from all boards where she/he is a director. But in this case, they have been not held guilty so far. But, yes, in such a situation, question marks are raised on the said individuals,” he said.
Mr. Gupta said the nomination and remuneration committees of all the companies, where these individuals were directors, would take note of the development and leave it for the boards and the shareholders to decide.
Shriram Subramanian, founder & MD, InGovern Research Services Pvt. Ltd., said: “It is for the individual companies to decide. The independent directors are not debarred or disqualified. Their role at IL&FS was collective responsibility and individually they have not been held guilty.”
According to Mr. Singhvi, this is a case of systemic risk, which has shaken the financial world, so these directors should be barred from the all the boards.
NCLT relief unlikely
“They are not fit to be on any board. The companies should make it very clear that they should resign. They may move NCLT, but NCLT will not give any relief as it is against public interest,” Mr. Singhvi said.
Following a government plea, the National Company Law Tribunal (NCLT), had on Monday, suspended Hari Sankaran, Arun K Saha, Sunil Behari Mathur, Ravindran Chandra Bhargava, Michael Philip Pinto, Jaithirth Rao and Rina Kamath as directors of IL&FS.
For example, Mr. Rao is on the boards of 13 companies, while Mr. Bhargava is in more than half a dozen companies.