Do independent directors enhance better corporate governance in companies in India?

Akshita Arora

Public Administration and Policy: An Asia-Pacific Journal, 2024, vol. 27, issue 2, 154-166

Abstract: Purpose - The effectiveness of independent directors in making autonomous decisions for better corporate governance in organizations has often been questioned. This paper aims to investigate their role in company’s decision making in India and the reasons behind their ineffectiveness. Design/methodology/approach - This paper examines the regulatory environment and ongoing reforms in which independent directors operate. It identifies crucial factors such as ownership patterns, the appointment and selection process that affect their autonomy. The analysis draws from newspaper articles, blogs, India’s regulatory requirements, The Companies Act and relevant related literature. Findings - The findings reveal that the independence of directors remains largely in form but not in function. This paper recommends a fair and more robust selection through an independent authority, and disclosure of the resignations of independent directors. Independent directors should be given more powers and their risk-reward scheme should be analyzed. Originality/value - The paper emphasizes the need for independent directors to be truly independent from the senior management, promoters, and other existing directors. It calls for tighter and more transparent appointment procedures to ensure that independent directors are not influenced by senior management and can bring objectivity to the company board.

Keywords: Board independence; Corporate governance; Independent directors; India (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:pappps:pap-05-2023-0057

DOI: 10.1108/PAP-05-2023-0057

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Public Administration and Policy: An Asia-Pacific Journal is currently edited by Professor Peter K.W. Fong

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