Independent directors key to fixing governance gaps: Pandey
Sebi chairperson Tuhin Kanta Pandey called for a fundamental shift in how independent directors function, stating that boardroom independence in India is often procedural and lacks effective oversight. He emphasized the need for boards to move bey...
By ET Bureau |
BCCL
Pandey's comments come amid heightened scrutiny of corporate governance at HDFC Bank following the exit of its former chairperson Atanu Chakraborty, who cited incongruity in values and ethics.
Mumbai: The Securities and Exchange Board of India (Sebi) chairperson called for a fundamental shift in how independent directors function, saying boardroom independence in India often remains procedural and does not translate into effective oversight. Companies must move beyond compliance-driven structures towards fostering diverse perspectives and constructive dissent within boards, said Tuhin Kanta Pandey at a corporate governance event organised by CII on Monday.
The next phase of governance reforms should focus on improving the quality of board engagement rather than adding new regulatory layers, according to the Sebi chief. "Boards are well constituted, but not always equally effective. Information is available, but not always interrogated deeply," he said.
Pandey said independent directors sit at the centre of this gap. While regulations have strengthened board composition and committee structures, independence should be viewed as a starting point rather than the end objective.
"Independent directors are there not only for compliance and pointing fingers at management, but also to support and find solutions through accountability," he said.
Pandey's comments come amid heightened scrutiny of corporate governance at HDFC Bank following the exit of its former chairperson Atanu Chakraborty, who cited incongruity in values and ethics.
The Sebi chairperson said there is a wide divergence in how independent directors operate - ranging from those who actively challenge management and contribute to decision-making, to those whose roles are constrained by limited access to information and reliance on management narratives.
"They are expected to provide oversight without being involved in day-to-day operations, challenge management while relying on management-provided information, and remain accountable without full operational visibility," he said. Pandey said capacity building is the next frontier of governance reform, citing the increasing complexity of boardroom issues.
The next phase of governance reforms should focus on improving the quality of board engagement rather than adding new regulatory layers, according to the Sebi chief. "Boards are well constituted, but not always equally effective. Information is available, but not always interrogated deeply," he said.
Pandey said independent directors sit at the centre of this gap. While regulations have strengthened board composition and committee structures, independence should be viewed as a starting point rather than the end objective.
"Independent directors are there not only for compliance and pointing fingers at management, but also to support and find solutions through accountability," he said.
Pandey's comments come amid heightened scrutiny of corporate governance at HDFC Bank following the exit of its former chairperson Atanu Chakraborty, who cited incongruity in values and ethics.
The Sebi chairperson said there is a wide divergence in how independent directors operate - ranging from those who actively challenge management and contribute to decision-making, to those whose roles are constrained by limited access to information and reliance on management narratives.
ADVERTISEMENT
"They are expected to provide oversight without being involved in day-to-day operations, challenge management while relying on management-provided information, and remain accountable without full operational visibility," he said. Pandey said capacity building is the next frontier of governance reform, citing the increasing complexity of boardroom issues.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
Related Articles
Infosys CFO Jayesh Sanghrajka joins Cars24 board as independent directorADVERTISEMENT
