Analyzing The Role Of Independent Directors In A Company

Tusharkant Panda, KIIT Law School, Bhubaneshwar

ABSTRACT

Independent directors are non-executive directors who are responsible for acting independently as a check or watchdog to the activities of the company and its management. They are completely unrelated to the company. They need to apply their independent judgment and make sure that the board of directors or other key managerial persons do their work without having any conflict of interest or do not make any personal profits. They also ensure to prevent any kind of fraud or malpractice in the company. They get appointed to several committees of the board. The Companies Act, 2013 has created such obligations for them so that they can enhance the company’s growth by increasing the governance mechanism. However, these are all statutory mechanisms given by the act to the Independent directors. In practicality, these directors have an image of toothless tigers. They don’t, in maximum cases, take any action on their part because of fear of getting fired or getting a hefty amount to stay silent. They mention the transactions in the general meetings or advise on those transactions in these meetings just to safeguard themselves from any kind of liability in the future. Further, there always exists fear and pressure on the independent directors which influences their decisions and actions in one or the other way. This paper is to analyze the role of independent directors in companies by comparing and evaluating the statutory powers with the actual scenario happening in the companies.

Keywords: independent Directors, section 149, corporate governance, minority shareholders