Role of Independent Directors in a Company: A Conscious Keeper for Corporate Governance?

Abstract

A company serves as an avenue for huge investments for carrying out its business essentially on the capital that's been raised from the general public. It is a common platform for different stakeholders for making investments to earn profits. The corpus raised belongs to various stakeholders, thus demanding that all the underlying transactions should be devoid of any attempt at dissimulation on the part of the company's management.

An independent director being an outsider not involved in the day-to-day management of the company is the best-suited person to act as a watchdog to ensure that the company is functioning objectively in the best interests of the stakeholders. It's the responsibility of the independent director to hold the management accountable in case of any suspected mismanagement within a company.

Thus, under such circumstances, it is apposite to acknowledge that with such huge amount of capital being raised and investments made; somewhere it rings a bell as to who shall bear the responsibility of such large scale investments being done? The practice across jurisdictions indicates that the presence of Independent directors is an answer to that.

The present write up delves into the current scenario in the Indian Corporate Sector and examine the role of Independent Director in Corporate Governance, in particular.