NEW INDEPENDENT DIRECTORS PREP UP FOR SELF-ASSESSMENT
EXAM FRENZY: ASPIRING INDEPENDENT DIRECTORS GEAR UP FOR SELF-ASSESSMENT EXAM
Exam fever is nudging India Inc’s new independent directors (IDs) to hone their skills as per the current requirements. In 2019, the Ministry of Corporate Affairs made it compulsory for all independent directors to pass a self-assessment exam to qualify for directorship. To clear this hurdle, several aspiring independent directors, irrespective of their age, are studying up.
The results of these efforts are evident based on the exam clearance rate. According to information accessed through Right to Information (RTI), a total of 10,577 independent directors took the self-assessment exam till June 30. Of these, 423 have failed, while 10,154 have cleared the test.
The pass percentage is 96%, the data show. An independent director who spoke on the condition of anonymity told ET that he had taken up study for the first time in nearly three decades of his life as a professional. “If someone fails to clear the exam, it’s not just a dent on the career aspirations of the candidate but also a discomforting fact in the professional circles,” he said, adding: “One must be even more careful if they are supposed to be on board of a listed company since such companies may disclose in the annual report if any of their IDs have failed the test.”
The exam is not very difficult, however, it certainly needs some preparation, especially if the ID is a professional from say technology or finance, said company law experts. For the IDs who are chartered accountants or company secretaries, the exam may be less challenging.
“The mandatory exam is nudging the independent directors to update their skills as per current market requirements. Earlier this didn’t use to happen since there was no mandatory exam,” said Pavan Vijay, founder, Corporate Professionals. “But now, the aspiring IDs are pursuing the syllabus through various study material available to clear the test successfully.”
This test is part of various measures adopted by the government to improve the quality of independent directors on the boards of companies. With these regulatory nudges, companies are also becoming more cautious while nominating IDs.
“The new systems brought in place in form of self-assessment tests and increased disclosure of training provided to the independent directors are definitely providing better exposure to the IDs in terms of their role, duties, etc.,” said Shriram Subramanian, founder, Ingovern – a proxy advisory firm. “Quality of IDs is also witnessing improvement since the companies are getting more thoughtful while choosing such directors and there is far greater sensitisation about the role an ID plays,” Subramanian said.