Independent Director tag no longer a symbol of social status
— By | May 22, 2015 12:01 am
With the new Companies Act mandating increased responsibilities and penalties on Independent Directors, the line of distinction between Independent and Executive directors is getting blurred says Ajay Nadkarni, Company Secretary, GlaxoSmithKline Pharmaceuticals Limited. In a free-wheeling chat with Dipta Joshi, also discusses the challenges of handling a high profile Board
Ajay Nadkarni, Company Secretary, GlaxoSmithKline Pharmaceuticals Limited (GSK) won the ‘Best Desk Award’ within the GSK Head Office for two consecutive years. For those who know Ajay, this comes as no surprise. After all, he is known to be a stickler for cleanliness. Another personal quality Ajay is known for is his disciplined approach towards the job at hand. “It ensures that I am never saddled with pending work,” says he.
And yet, Ajay is no stranger to the challenges that Company Secretaries face. Reminiscing about the time when his first employer, Skypak Couriers Limited (name changed to Skypak Courier and Cargo) came out with a public issue in 1995, he says, “Since the issue was a first by a courier company in the country, there was no industry average to fall back on while convincing the underwriters to subscribe to the public issue.”He faced a similar challenge when Bliss Chemicals and Pharmaceuticals Limited (name changed to Bliss GVS Pharma) which was backed by the same promoter did a Rights Issue of shares. “The company manufactured women’s contraceptives which was a new concept then. This again meant using one’s skills to convince the underwriters,” adds Ajay.
Next, Ajay joined ADF Foods Limited (American Dry Fruits) which too had charted the public issue route a couple of years before he joined them. “Here the challenge was to get a family-run organisation to realise the importance of compliances and responsibilities that come once you are a publicly listed entity,” says he.
Ajay’s association with GSK, the British pharma major began 16 years back when he joined one of its associate companies as Company Secretary. In 2001, he became GSK’s Company Secretary. Currently, he is also its General Manager-Administration. GSK has provided Ajay with several opportunities to showcase his skills. He was involved in the merger of SmithKline Beecham India Limited in 2001, the merger of Burroughs Wellcome (India) Limited with GSK in 2004, the Buy-back of shares in 2005, the hiving off of the Health Care business and the Fine Chemicals business in 2007 and 2008 respectively besides the 2014 stake hike that saw the parent company, GSK Plc increase its stake to 75 percent.
Typically, balancing the different expectations of the Executive Directors as well as the Independent Directors is a big challenge for any Company Secretary. In a multinational company, the problem gets amplified when the expectations of the parent company’s nominee also need to be considered. But Ajay believes, with the correct processes and systems in place, such difficulties can be overcome.
For Ajay, the bigger challenge as a Company Secretary is handling GSK’s high profile Board where every Independent Board Member is a highly knowledgeable, distinguished and respected personality. “No matter how much you study during the Secretarial course, handling a high profile Board needs street smartness and presence of mind,” says Ajay. He feels a CS should pay as much attention to acquiring and polishing his soft skills.
According to Ajay, the new Companies Act, 2013, is a pragmatic piece of legislation. “The old Companies Act had more than lived its life and a new law was overdue,” says he. That the new Act focuses more on corporate self-reliance and greater automation is another positive. Ajay cites the simple example of filing of various forms with the ROC (Registrar of Companies). “The forms under the old Act would be ‘taken on record’ only after an officer from the ROC would scrutinize it and find it fit. This led to delays. Now, online filing ensures that the public can view the form the very next day. It also ensures some level of pre-scrutiny since the form cannot be completed unless all required information has been filled,” says Ajay.
While some corporates have been complaining about the increased compliance under the new Act, Ajay does not view it as a shortcoming. According to him, “The compliance per se is not taxing, but it the lack of clarity that is killing. But this situation will not last forever and things should settle down soon.”
While Ajay welcomes the content and intent of the Act, he thinks many of its regulations should have been introduced in a phased manner to minimize the confusions around it. “For instance, instead of mandating Women Directors en masse, the provision could have been made mandatory for big-sized companies at first instance, since it would be relatively easier for such companies to get a Women Director. Currently, the smaller sized companies are known to have nominated Directors just to fulfill the regulatory requirements even when the candidate does not have the required understanding of the industry,” he points out.
Ajay predicts a similar shortage of Independent Directors as well. Being an Independent Director on any Board is no longer a symbol of social status. With the new Act mandating increased responsibilities and penalties on Independent Directors, the line of distinction between Independent and Executive directors is getting blurred.
Such overlapping of tasks also warrants greater accountability on part of the CS, who among the many duties he performs is also the company’s conscience keeper. “Today, one of the saviors for an Independent Director is the ‘Minutes of the Meeting’ that are prepared by the CS. These will act as proof of the independent Director having recorded his dissent on contentious issues,” points out Ajay.
Ajay’s advice to youngsters getting into the field is to look beyond the Company Secretarial function. He believes a CS aiming to grow in the company’s ranks should take
up other functions as well in order to get a hang of the core functions required at higher levels. “A CS is a conduit between the Board and the management and is privy to just about everything that is happening in the company. Thus a CS needs to keep his eyes and ears open and pick up any opportunities in the allied fields that could be available” he says.
The new Act has certainly elevated the position of the Company Secretary as he is now termed as Key Managerial Personnel along with the Chief Executive Officer and the
Chief Financial Officer. The functions of the Company Secretary have for the first time been defined in the Act. The Company Secretary’s appointment and remuneration are now to be approved by the Board of Directors. All this will go a long way in getting recognition for the Secretarial profession, feels Ajay.
Says he, “We have been given both respect and responsibility. Now it is up to us to showcase our skill sets. The domain is open; it is up to us to communicate.”
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