Oh, I kid the directors! Who would think of such a thing?
Well, the folks in India for one. Bloomberg reports that, after a series of corporate frauds, the Indian government is attempting to raise the country’s corporate governance standards by requiring that independent directors on corporate boards pass an exam as a precondition to their appointment, according to the Indian official in charge of corporate affairs. Following a number of bank frauds, allegations of improper lending, defaults that nearly triggered a financial crisis and bankruptcies among billionaires, “[w]ho will watch the watchdogs has become a burning question in India.” Indian law requires that one-third of the board of each listed company be composed of independent directors. Commentators suggest that independent gatekeepers should have been on top of these problems before they ripened into crises.
The online exam will cover Indian corporate law, ethics and “capital market norms.” The goal is to ensure that independent directors understand their fiduciary duties. According to the official, “[w]e want to propagate corporate literacy to make them aware of their duties, roles and responsibilities.” The “ultimate aim of the exam,” he said, “is to ensure that officials aren’t able to plead ignorance if they’re hauled up over a lack of oversight.”
Do-overs, however, are unlimited, and directors who have already served for several years will be exempt. (Hmm, but aren’t the current directors the ones that critics charge should have detected all these problems before they developed into crises?) Current directors will have to register on a kind of Match.com platform, so their services can be enlisted by those in need.