Marginal impact

1 min read . Updated: 30 Jun 2021, 10:44 PM IST Livemin

Non-aligned directors need to derive their voice from those they represent. Shareholder apathy, though, lets C-suite executives hold sway

There’s little doubt that the role of independent directors on company boards needs regulatory attention if corporate governance in India is to improve. However, it’s not altogether clear if tightening existing norms will achieve very much. This week, the Securities and Exchange Board of India raised the minimum proportion of independent directors that a firm’s nomination and remuneration panel must have from half to two-thirds. Also, their appointment and removal will require a special resolution that would take a three-fourths vote rather than a simple majority of shareholders to be approved.

A few other measures have also been announced to protect the independence of such directors from ownership-aligned managements. Broadly, the idea is to empower them to keep watch on a company’s affairs on behalf of stakeholders who are not promoters. But a quantitative tilt in their favour and higher voting thresholds won’t do much to curb business misgovernance if shareholder democracy remains weak in the country. Non-aligned directors need to derive their voice from those they represent. Shareholder apathy, though, lets C-suite executives hold sway.