Speak up or quit, top lawyer tells ind directors

By Chandeepa Wettasinghe
In the wake of allegations of continuous mismanagement practices at publicly listed companies, a leading attorney in the country called on the independent directors on the boards of such companies to either speak up or quit. “You have to ensure that your voice is heard, otherwise, there’s no point of being there,” President’s Counsel Dr. Harsha Cabral told a Sri Lanka Institute of Directors gathering held at Cinnamon Grand this week. 
Under the Code of Best Practices on Corporate Governance of the Securities and Exchange Commission, at least two or one third of the non-executive directors of a publicly listed company should 
be independent.
Dr. Cabral, who also functions as an independent director on a number of publicly listed companies said, independent directors are just as responsible as executive directors in the eye of the law under the Companies Act No. 17 of 2007, which attaches criminal liability against 
the directors. 
“Even after 10 years, some parts of the Companies Act of 2007 have not been tested, especially related to the role of directors,” 
he said. However, Dr. Cabral said if independent directors take into account the interests of all stakeholders including shareholders, suppliers, employees, the public and the environment, and voice their concerns and opposition at board meetings, the judiciary may 
become lenient.
“If you can’t make a proper decision, call for third party opinions. Cover your actions. If you don’t agree, get your dissention recorded in the minutes.  Certify the minutes. A judge might look better on you and treat you differently after looking at your disapproval,” he said.
 He noted that other directors and chairmen may not be able to voice their dissent on malpractices since they have vested interests or have to answer to higher powers such as specific shareholders, and may even try to limit the flow of information coming into the boardroom.
“But as a director, you have the same powers as any other director. You are privy to more information than the shareholders, and you can call for any information, which the shareholders cannot,” he said.
He further added that in the case of a group of companies, an independent director should have some knowledge about group entities. “Ignorance is not an excuse,” 
he said.

Dr. Cabral also noted that independent directors are chosen based on their expertise on a field that a company requires, and if the board of directors is not making use of such expertise, an independent director should exit as well.
“Make sure the board is using your expertise. Exit if you’re feeling uncomfortable,” he said.
Dr. Cabral said that not all companies ignore independent directors and keep them around just for the sake of regulations.
“There are some companies that take serious note of independent directors. When they say no, it’s no,” he said.