It has been an old concern of establishing corporate governance in companies since the commencement of large corporations.
Corporate governance is the standards and practices that have progressed with time and are recognized by laws necessary to establish fairness in dealing with company members.
It also ensures accountability of the directors to the members and clarity in their dealings.
Substantial research and analysis have evolved the “independent director” institution, which will act as a watchdog to ensure fairness, legal compliance, and corporate governance.
To ensure objectivity to evaluate a company's performance and well-being without having any conflict of interest or undue influence is one of the main reasons behind appointing independent directors.
To ensure good corporate governance, the appointment of independent directors is required for listed companies.
Bangladesh Securities and Exchange Commission issued a notification which prescribed a corporate governance code to improve corporate governance in the interest of investors and the capital market.
This notification guided provisions regarding independent directors, and it refers to listed companies in Bangladesh.
In the company's board, at least one-fifth of the total number of directors must be independent directors.
Although holding this essential responsibility, the independent directors are not financially satisfied as they are poorly paid in Bangladesh.
Moreover, the existing corporate governance code, enacted in 2018, did not say anything about independent directors' remuneration, although each company must publish their directors' remuneration in annual reports.
The International Finance Corporation (IFC) found a study that independent directors are getting poor remuneration for their services at boards in our country's listed companies.
In Bangladesh, independent directors are paid no money for board members or paid very low for attending board meetings.
Here, an independent director gets an average remuneration of less than Tk1.5 lakh or $1.76 thousand annually.
Remuneration for independent directors in banks is slightly above the average remuneration of Tk1.48 lakh.
In 2018, IFC published a report titled "Portrait of Bangladesh's Independent Directors." revealing that the average annual remuneration of independent directors varies widely by sector in Bangladesh listed companies.
Independent directors receive $10.66 thousand each year on average. It ranges from Tk20,000 ($238) in the travel and leisure sector to Tk670,000 ($7,976) in the food and allied sector.
Many companies in India also keep a small portion of their net earnings for distribution among independent directors.
They take regulatory approval for this.
In Singapore, if a renowned professional desires to take an independent director role, it also produces a good amount of money, aside from being very illustrious.
The average tenure of independent directors in boards of Bangladeshi listed companies is 2.4 years, while all but four independent directors serve only one listed company.
Moreover, according to that IFC report, 58% of them have a master's degree among the directors, and their average age is 64 years, including an average professional experience of 37 years.
In Bangladesh, aside from dividend earnings from the company, owner directors enjoy several benefits.
In contrast, though believed to be contributing because of their long-standing professional background, the independent directors are paid a small amount as per regulatory guidelines, apart from a "good lunch" on the board meeting day.
To get the best out of the independent board members or external directors, the administrative agencies should review the current standards or guidelines, re-check out the process they are being accepted in, and ensure the independent directors are empowered well and remunerated well according to the ultimate performance of the company.
In the developed world, most successful companies are being run by independent directors and professional management.
Owners or shareholders mostly remain happy with their return on investment, equity, or return per share.
The success of an independent director depends on his/her caliber, cooperation from the board, awareness of the shareholders, and finally, monitoring of the regulatory authorities.
Independent directors' roles are of supreme outcome in establishing good governance.
The ultimate beneficiaries are all stakeholders of companies, which refers to the ultimate reward for them, not the day-to-day interference.
The independent directors can raise their voice in the subsidiary company and different committees, but there is no voice to raise regarding their remuneration.
The writer a recipient of the DLA Piper Scholarship, and is also general secretary of North South University Law & Mooting Society (NSULMS)