Role of independent directors – A review of selected case studies

Abstract

A corporation serves as a meeting place for its many different types of stakeholders, including its customers, vendors, suppliers, workers, investors, shareholders, and general public at large. It is a tool that has the potential to bring in massive amounts of funds for a going company. Every transaction that takes place inside a corporation ought to be honest and open to scrutiny for all its stakeholders. A firm with strong Corporate Governance and an efficient Board of Directors is more likely to attract investors and to successfully attract investment. It is essential that the Board of Directors be independent in order to guarantee that it will perform its duties in an impartial manner and will keep management responsible to the firm. According to common practise in a variety of countries, the existence of an “Independent Director is the solution to that problem. Realising the importance of independent directors SEBI introduced clause 49 in its listing agreement. Every listed company should have at least 1/3rd of its board of directors as independent directors. This write-up dives into the current situation in the Indian corporate sector and examines the function of Independent Directors in particular with regard to Corporate Governance and Companies Act 2013.