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Excerpts
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In a country like India, where several corporations are family-run businesses, the post of an Independent Director has historically been filled by someone who is related to the Promoter or Chairman. However, with the increasing focus on global expansion and the need for expert guidance, there has been a pragmatic shift toward hiring qualified and capable Independent Directors. Much water has flown under the bridge.
Boardrooms can often become challenging environments where conflicting opinions are raised, leading to potential impasses. Independent directors play a key role in neutralizing these situations, managing conflicts objectively and facilitating resolutions that benefit all stakeholders.
This trend towards hiring independent directors based on their qualifications and capabilities is a positive development for corporate governance in India. This facilitates expert guidance, diverse perspectives, healthy skepticism and constructive tension on the board, which in turn can facilitate an organization’s progress in a rapidly evolving global business environment.
In this period of intensified scrutiny, Independent Directors serve as a catalyst for more effective communication between the executive team and the shareholders.
The search strategy for independent directors needs to be developed beyond the narrow prism of numbers. In fact the entire process through which independent directors are identified, nominated and recruited needs careful introspection. One might conclude that in the absence of independence, the ability of stakeholders to truly derive value from a company may be inversely proportional to numbers of seats on the board.
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