Corporate Governance : Role of Independent Director

The role of the independent director has seen a paradigm shift with the change in respect to governance of Indian businesses. It can be attributed to the increased regulatory scrutiny and compliance. The expectations from an independent director have undergone significant change.

There was no concept of an independent director in the law governing Indian listed companies earlier. However, it was in 1992 on recommendations of the Cadbury committee on Corporate governance that there was a mention of ‘non-executive director’ to bring indecent views to the table. The Kumar Managalam Birla committee constituted by SEBI in 1999 also mentioned the appointment of such a director to the board. But what followed was the filling of seats of independent directors from family, friends, mentors, trusted advisors.

The Companies act 2013, mentions that the duties of independent directors include providing independent judgement to the board, to secure the interests of all stakeholders and report concerns of unethical behaviour and violation of code of conduct.
The role of the independent director is to contribute to the company’s strategic growth and secondly to act a watchdog, keeping the system in check. With the recent frauds, scams, proxy firms influencing decisions, the independent director’s role gains more prominence.