ROLE OF INDEPENDENT DIRECTORS IN MAINTAINING CORPORATE GOVERNANCE – CRITICAL EVALUATION

Recent scandals have damaged India’s business image among international investors, despite the independent director’s role in promoting corporate governance. Satyam and Enron instances have stressed the necessity for independent directors. Clause 49 of the SEBI listing agreement, Birla report, CII suggestion, Narayan Murthy Committee, and J.J. Irani Committee reports didn’t help. Tata and other examples illustrate that the independent director is operating in a promoter’s line and has failed to prevent undue enrichment by management and promoters. This article found a disconnect between IDs’ actual function and their intended purpose.

Independent directors should vote and participate in corporate matters impartially since they have no stake in the firm. The Independent director may be removed by a majority shareholder vote. Independent directors may oppose one-sided initiatives to defend minority shareholders’ interests. In Corporate Governance, Independent Directors are crucial to defending minority shareholders’ interests.

This article examines the Indian corporate governance instrument of the independent director. Due to the independent director’s independence from management, this analysis is significant.