After reading my previous emails, at this stage you are probably wondering whether you have enough experience to become an independent director. And why would anyone appoint you as such?
Both are good questions. But here are a few things to consider.
First, there is a huge scarcity of independent directors (IDs) already in India. More than 30,000 independent directors are needed currently, but only about 11,697 are fully eligible as of now, out of 21,318 whose names are on the database.
About 2/3rd of the eligible directors are yet to clear the online proficiency self-assessment test, conducted by the Indian Institute of Corporate Affairs (IICA), that all independent directors must pass within two years of their name being added to the ID databank.
Failing to pass the test within the stipulated period shall result in the removal of the individual’s name from the databank.
Given this situation, we are expecting to see an exponential increase in the demand for independent directors. You may see IDs who have three to four decades of experience, but this is no longer going to be possible or necessary.
Until the 1990s, it took decades for a company to grow large or get listed. Starting and running a business itself was a very difficult thing. There was licence raj, lots of corruption and absence of venture capital and foreign investment. The state of technology was also poor. Most businesses were brick-and-mortar, and required huge amounts of investment.
Many businesses preferred to transact in cash and stay informal, and as a result, they could not corporatise or raise investments to scale up even when the economy liberalised.
After 2010, technological innovation and ready availability of venture capital has brought tech startups in India to the limelight, as software started eating the world. Billions of dollars in venture capital and private equity investment is made every year into new businesses to enable them to grow.
Today, Indian startups are growing extremely fast by going global on the back of cheap availability of talent back home and using venture capital to expand. Even the informal sector economy is formalising through the introduction of reforms like digitisation, UPI, and the pandemic.
The time taken for a business for a business to scale up and get listed has drastically reduced. Real estate, manufacturing, pharma, hospitality, trading, transportation, chemical – there are thousands of businesses that would go public in the coming years. And public companies,as per Section 149(4) of the Company Act 2013, must have at least one-third of the total number of directors as IDs.
This is why there will be a huge demand for independent directors.
Given this demand, it will no longer be important to have decades of experience. Modern businesses may prefer younger independent directors who have some experience of working in the relevant industry.
The government, too, recognises that even 10 years of experience is sufficient – in fact, the minimum statutory age to be an independent director is only 21!
So the experience that you have is already sufficient, provided you build the right kind of track record and crack the exam. We will talk about that in a bit.
Second, How many of you feel that only extremely experienced people with decades of track record can be independent directors, and you, with whatever experience you have, can’t make the cut?
Let me shatter your misconceptions. Here are some professionals, in their 30s, who became independent directors:
- An engineer who also pursued a law degree: Rohit Jain, completed his engineering from Manipal Institute of Technology in 2011 and LLB from IIT Kharagpur in 2014. He is a partner at a small law firm Singhania & Co. He started his career as a legal associate in 2014 and became an independent director in Titan Biotech Ltd. in 2021. Here is his profile.
- A CS who became an independent director: Mayuri Sinha, a CS (2015) and LLB graduate (2016) from CCS University, started as a management trainee in 2014 and became an independent director in 2020 with the KW GROUP. She became the ID of another company, Supreme Housing Finance Limited, in 2021. Here is her profile.
- A lawyer who became an independent director: Shweta Musale, LLB graduate (2012) from University of Mumbai and CS, started her career as an assistant manager in the RPG Group and became independent director in the same group in 2021. She also worked at other places before becoming an ID. Here is her profile.
- You don’t have to be a CA/ CS/ lawyer. Here is a non-lawyer who became an ID: Quleen Kaur Bijral is an MA (English) and PhD. She did many voluntary social services. She is also a columnist and novelist. She conducted various workshops and conferences at IIT J&K. She started her career in 2016 and became an independent director of J&K Infrastructure Development Finance Corporation Ltd in 2020. Here is her profile.
Long story short, if you work on your profile and personal brand, within a few years you can become an independent director of multiple companies.
If you are a woman, the competition is even less.
Some companies make up for the lack of gender diversity at the board level by appointing women as independent directors. And if you have more experience, you can use that to your advantage.
We studied the career trajectory of more than 500 independent directors, including those with three to four decades of experience, and found a few common patterns:
- They may have several years of experience in any one business area (operations, engineering, sales, marketing etc.), or may be professionals (lawyers, CAs, CS, cost accountants, etc.) who have founded their own venture and made it successful, or served as director to another person’s venture. Many of them started out in junior roles. Some have experience of working with the government or civil services. About 10-15 years of hands-on experience of running a business is appreciated.
- They may have some previous experience which is relevant to the company. For example, Vidit Aatrey founded a startup before being appointed as an independent director to a company that invests in other fintech startups. Kaushik Dutta was a CA and worked at PWC as a partner before being appointed to Bharat Pe’s board.
- They may have some involvement in industry associations to represent and promote the interest of the players in that industry.
- They could hold positions as guest faculty/ visiting faculty or experts with universities and institutes as well.
- They have strong and positive media coverage. A good image is important for these roles.
- They have a strong personal brand and have secured many awards and recognitions, have published books, etc.
Here is one of our learners who is on track to become an independent director:
Kumar Rajeev Ranjan was an advisor to the finance ministry for preparation of the annual budget for the year 2023-2024. He was Chief General Manager at South Eastern Coalfields Limited.
He had started as a management trainee in the company, and worked there for 38 years. He was also appointed as a board member in Coal India because of his expertise in law and land revenue matters.
He has published several articles on corporate governance. He is on track to becoming an independent director, and will attempt the ID exam next year.
So how many of you are excited about becoming an independent director at this point? Are you ready to receive professional help for this?
If so, contact our counsellors on +91 98186 78383 (10.00 am-8.00 pm IST) or email us at counselling@lawsikho.in, to know more.