THE ROLE OF INDEPENDENT DIRECTORS IN CONTROLLED FIRMS IN INDIA: AN EMPIRICAL ANALYSIS OF DISPUTES INVOLVING DIRECTORS

Abstract

The role of independent directors has come under the scrutiny subsequent to the Satyam fiasco, and the bulk resignation of independent directors that succeeded. It has been argued that there is no intelligible comprehension of the function that an independent director is envisioned to be involved in the boardroom. On the top of it, they set forth the doubtful sceptical points over the aptness and suitability of criminal and civil liability laws to the independent directors. In addition, they are repeatedly a cause of concern, and it is often asserted that these issues of consideration and concern must be inscribed in the advanced change to India’s company codification. In a firm, directors with shorter tenures, and directors who are more powerful or independent are more predictable to be embroiled in a dispute. This article puts a light on the establishment of the institution of the independent director as a tool of corporate governance, and evaluates its’ efficacy in the Indian scenario. The issue that the independent director was framed to tackle in the US is the agency problem between the shareholders and the management stemming up from a diffused shareholding framework. However the corporate mounting in India is inked by the existence of a controlling shareholder, and therefore the major issue that arises in the corporate governance is the conflict of mind between the minority shareholders and the majority shareholders. The evolution of the concept of independent directors has taken place from the concept of US and UK and in this way the researcher can analyse that by the adopting the same in the Companies Act 2013 India too has been adaptive to the concept of independent directors by imbibing the role and functions, duties, manner of appointment of the independent directors etc. In this paper, I will dwell upon the institution of the Independent Director in the regulatory framework of India, and examine its’ workability particularly in view of the wide differences in the corporate cultures of corporations between Anglo-Saxon core of the US and the UK on the one hand, and India on the other.