Independent Directors of a Company: The Need for an Indian Model

Abstract

The corporate governance jurisprudence in a developing country envisages different goals in its policies which go much beyond simply profit making utilitarian initiatives of developed countries. Transparency, accountability, proportionate representation are few of the good governance practices adopted in countries having concentrated ownership structures. Independent directors are non-executive directors who are appointed to the board of a company to provide an objective and unbiased perspective on corporate decision-making. They are expected to act in the best interests of all stakeholders, including shareholders, employees, customers, and the wider community The role of independent directors has become increasingly important in recent years, particularly in the wake of corporate scandals and failures. Independent directors are expected to bring a diverse range of skills, experience, and perspectives to the board, and to challenge management where necessary to ensure that the best interests of all stakeholders are being served. However, the role of independent directors is not without its challenges. They are expected to have a deep understanding of the company's operations, financial performance, and strategic direction, while also maintaining their independence and objectivity. They must also navigate complex relationships with other board members, management, and shareholders, and must be able to balance the interests of different stakeholders. The issues so far having been addressed by the Companies Act, 2013 was reduction in their liability, ensuring presence of independent director in the board as one-third of the board quorum, provision for appointment of director by small shareholders, provisioning for a data bank directory for independent directors etc. The article envisages to examine the contextual irregularity of the institution of independent directors under the Companies Act, 2013, through the lenses of protection of rights of minority shareholder, due to lapse in insight into the Indian insider model of corporate governance.