The Role of Independent Director in the Indian Corporate Sector: An Evaluation

Abstract The pivotal role in any system of corporate governance is performed by the board of directors. Corporate governance codes and guidelines world over advocated that boards be comprised majority Independent Non-Executive Directors. They are distinct from the Executive Directors who are full time employees of the company. Independent Directors can bring an objective view to the evaluation of the performance of the board and management and can play an important role in areas where the interests of management, the company and its shareholders may diverge. In wake of large corporate frauds world over including India, the role of Independent Directors is under critical analysis. The study evaluates the role played by Independent Directors in select corporate boards of India with the help of a performance assessment exercise. The findings reveal that Independent Directors play a moderate role. The greatest challenge is the closed ownership structure of Indian companies which impairs true independence apart from other factors. Changes are required to revamp the structure of the institution and the support systems to embolden Independent Directors such that they are able to perform the monitoring role more effectively.

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