The Hindu Business Line : Let's name the parts

IN CORPORATE lingo, a director, other than executive or whole-time, attracts the prefix `part-time'. The term part-time has almost a pejorative ring to it. It has connotations of lightness of work and responsibilities, besides vesting the office with trappings of a sinecure.

As it is, a person can simultaneously be a part-time director in as many as 15 companies, excluding directorships in private companies and alternate directorships among others.

The reforming of part-time directorship should start with this, if one may say so, licentious limit. First, no one should be allowed to hold the office of director in more than five companies.

Second, no concession should be made in favour of alternate directorship because although in law an alternate director is at best a proxy, in effect he performs the same functions and, by extension, has to bestow the same time on job as the original director does.

Appointment of alternate directors is almost de rigueur in Indian subsidiaries of multinational companies with the alternate directors virtually standing in for the original directors right through their tenure.

Third, directorship in two private companies should be counted as one for the purpose of this limit because such directorships too demand devotion of time and energy to the office if not to the same extent.

A carte blanche in favour of limitless directorships in private companies trivialises the limit on directorship put by Section 275, especially the rationale underpinning it.

That there is nothing casual or laidback about the office of part-time director is all the more clear now that every company with paid-up capital of Rs 5 crore or more is required to put an audit committee in place consisting of not less than two-thirds of part-time directors.

Such touching faith in part-time directors reflects the naïve belief that normally they do not have any axe to grind. But the same naiveté is not to be seen in the Listing Agreement, which contemplates disinterested part-time directors being appointed to the audit committees of listed companies.

This is as it should be because often directorships are offered in a spirit of give and take and not rarely in a spirit of mutual back-scratching. Incidentally, reducing the number of directorship per person would have a sobering effect on the latter tendency.

Reverting to the discussion on hand, however, the point is, a part-time director doubling in as a member of audit committee is practically a whole-time director in terms of moral responsibilities if not in terms of time devoted to the office.

It seems there is a move afoot to revise the limits on remuneration payable to part-time directors. As it is, the maximum that can be paid to them is 1 per cent if there is a managing or whole-time director; else it is 3 per cent.

Since the maximum managerial remuneration is 11 per cent of the profit, in companies where there are more than one managing or whole-time director, effectively only 1 per cent is available for the part-time directors assuming between them the former have taken 10 per cent.

While there is definitely a case for revision of part-time directors' salary, equally there is a case for demanding more out of them towards which sharp reduction in the number of directorships could be one of the steps.

Casting greater responsibilities on part-time directors would incidentally scare away non-serious candidates.

As it is, celebrities — film stars and cricketers to be precise — adorn the boards of quite a few companies. They wear directorships on their sleeves as if it is a badge of honour.

Arguably, apart from lending the air with conviviality at the sombre meetings, there is precious little they can possibly contribute.

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