Independent Directors – Missing Skill - Case From A Listed Entity Where Corporate Governance Failed.

 Corporate Governance Practice Audit  

* Birendra K Jha                                                                                                                                                                       Independent Director, IICA ( Ministry of Corporate Affairs ); Corporate Governance  Practice Audit; CSR Social Impact - CSR Planning & Implementation;  Expert Company Law -SEBI Law - Social & Environmental Law   EMail: birendrajha03@yahoo.com

Large skill gap of Independent Directors are shocking. Here a case is reported from a  listed entity, which operates in more than two states. It has terminated more than 700 employees without adopting the due process of  Labour Law. This was not reported in the Annual Report of 2024-2025. There is also a complete failure of the Secretarial Compliance Audit. This is exhibiting a large skill gap of the Independent Directors. They do not know Labour Law. 

The Independent Directors should must know Corporate Governance Law. The purpose of the  Corporate Governance, is ethical and law abiding. The Independent Directors should must look all the law abiding practices regulating financial, commercial to the human resource practice including the environmental laws. 

Most of the listed companies Independent Directors are poor on Corporate Governance Law.  Hardly they know  law administration matter to conduct and run the company effectively. Such skill gap is very disturbing. This skill gap impacts the performance of the Independent Directors. 

A case is elaborated here from a listed sector. This elaborates clearly what skill is seen missing from  the Independent Directors. This skill gap  block the Independent Directors to perform properly. They have failed to monitor properly the disclosure provision of the SEBI LODR Regulation 34 (2) (f) on the  - Annual Report Disclosure - BRSR Disclosure ( Principle 3). This provision mandates  disclosure of the illegal terminated employees, which is here more than 700 employees. The BRSR requires here Adverse Impact Reporting. This is not just HR metrics. If even one of the following exists, compulsory disclosure is needed:

a) Unfair Labour Practice notice by the Labour Department; b) Conciliation Order; c) Labour Court Award; d) Industrial tribunal Award; e) Settlement due to unlawful termination & f) Regulatory show cause notice under the labour laws. 

The entity  is listed in Stock Exchange both the NSE and the BSE. This is operating in more that two states. Hence Central Labour Law is applicable here. This listed entity  started reducing manpower for cost cutting measures. It adopted "remote transfer" and other poor tricks. The Independent Directors sitting at the Board failed to notice this poor HR practices. This poor HR practice,  was needed to be reported under the SEBI LODR Regulation 34 (2) (f).  This poor HR Practice damaged and collapsed the Corporate Governance in this listed entity. 

The listed entity,  simply terminated employee on charges of “stopped reporting” using "voluntary abandonment",  “absconding from work” or some other charges. As stated, this listed entity on record has terminated more than 700 employees on the ground of “stopped reporting”. It created a chaos. The SEBI and the RBI, both failed to control these malpractices. However Government of India took action. The Labour Commissioner issued summon notices to the CEO of the listed entity on clear charges of the "Unfair Labour Practices". 

Here the Independent Directors mistook the case as day to day  HR operation. The Independent Directors allowed silently  a poor practice, which was going to hit and damage the good Corporate Governance practice.  The Independent Directors fail to understand here the clear meaning of "Good Conduct" and "Misconduct" in the Employment Law. The Independent Directors fail to monitor and examine the termination related files. They failed to challenge the HR Managers at the Board Meeting. They failed to endorse agenda in the Minutes of Meeting to take strong "Disciplinary Action"  against the person responsible for such chaos. 

The Employment Law is very clear. The Independent Directors should must know the Labour Law. If he doesn't know the Labour Law, he is unfit to carry the work of the Independent Director. If any employee "is not reporting", then this is a clear case of "Misconduct". The Misconduct should must pass all these eight steps: 

1) Show cause notice for the "Misconduct".

2) Suspension order - Pending Charge sheet and domestic enquiry ( Here half salary is given to the employee as subsistence allowance). 

3) Conduct of enquiry

4) Enquiry officer report.

5) Disciplinary officer action on the report. 

6) Serving another show cause before termination. 

7) Termination order.

8) Release of full and final. Release of important papers and other service benefits. 

The listed entity without adopting above eight different steps, has  "Terminated" more than 700 employees.  The list is shocking. How Independent Directors remained here silent. Clearly they have demonstrated that they are not "law literate". The Secretarial Compliance Audit also failed here. The illegal cases of "Terminations" are shocking. Some can be elaborated here: 

a) An employee  on approved medical leave when undergoing medical treatment was treated as absconding from job and terminated  him on “voluntary abandonment” and “stopped reporting”.

b) Employees working in  operations were transferred  to sales. So that they can voluntarily resign from job. This was just an illegal design.

 

c) Women employees fear here to disclose about the "Pregnancy". Since pregnancy attracts Maternity Leave. That is practically a trick  of removal and poor performance. Many women employees, were not provided proper "Maternity Leave". They were aware with the culture. They were "Forced to Resign".

d) Whistleblower Employee is targeted here. This is the duty of the Independent Directors to protect the "Whistleblower Employee". One of the "Whistleblower Employee" was transferred. He was citing policy violation. He was forced to move outside the operation. He was not able to put attendance. On this ground the listed entity charged him as "Absconding From Duty" or "Voluntary Abandonment of Job".

   

e) So far, the Central Labour Commissioner has conducted numerous hearings on the issue.  The listed entity is avoiding the hearings.

 

f) The Central Labour Commissioner is on record where it said the management has not adequately complied with the principle of natural justice while initiating action to terminate the services of the complainant and others.  Thus, the action of the management amounts to Unfair Labour Practices. 

The listed entity published the Annual Report of 2024-2025. This action disclosure was missing in the BRSR Report. Even the Secretarial Compliance Audit failed to monitor the Human Right Law violation. This is the duty of the Independent Directors to protect the Human Right in their listed entity. They are bound to protect the Corporate Governance Law. If something was wrong practice. Why not they challenged in the Board Meeting? The Corporate Governance is an ethical practice of various important laws, including the financial law as well as the human practice administration laws.  

This call is needed to be taken by the NSE and the BSE, where this defaulter company is listed.  They should raise complain to the SEBI in the interest of the shareholders, why the important disclosures needed under the SEBI LODR Regulation 34 (2) (f) are not reported and disclosed.  This is  "Missing Skill" of the Independent Directors. What is missing skill is very clear on the records.