INDEPENDENT DIRECTOR – A SIGNIFICANT PILLAR OF CORPORATE GOVERNANCE

Abstract

Corporate Governance refers to the governance or regulation of companies or corporate entities. It facilitates a smooth and an efficient functioning of a company by maintaining transparency in the overall regulatory framework of the company. It also looks after the rights and interests of its members. Corporate governance takes the centre-stage, especially in today’s age, where the corporate sector is a victim of several frauds and malpractices. This article will introduce the readers to the concept of Independent Directors, who play a pivotal role in facilitating a transparent and an impartial governance within a corporation. Thus, this paper throws light upon the role and the significance of Independent Directors, who occupy centrestage when it comes to the issues of corporate governance. The first and the foremost thing which this paper talks about is the very meaning and interpretation of the term ‘Independent Director’ as defined under the relevant statutory legislations and provisions. It then moves on to trace the history and the origins or sources of Independent Directors as an institution. It is discussed as to how and why did India introduce and adopt into its corporate laws, the concept of independent directors. A comparison is drawn between the legal status and position of independent directors during the period before the year 2013, and during the period thereafter. Some of the most infamous corporate scandals in the country that put up a big question mark over the authority of independent directors have also been talked about. Further, the paper provides valuable and genuine suggestions by emphasizing upon the recent amendments approved by the Securities and Exchanges Board of India (SEBI) with respect to independent directors, for the purpose of strengthening their position and influence in the mechanism of corporate governance in the country. An analysis of the approved amendments is done at the end that is likely to be an appropriate step taken towards preserving corporate governance in its true and fair spirit. After going through this paper, the readers will be in a position to gathera deep and a holistic understanding about the changing role and position of independent directors over time, with a fast developing and transforming business scenario. The paper strictly confines itself to the study of independent directors from the Indian corporate governance perspective. This paper has neither been published, nor has been sent for publication elsewhere.