The time has come to dispassionately re-examine the concept of an "independent director". The recent controversy over the removal of independent directors from public sector undertaking boards misses this essential and vital question. The fact is that the concept of independent directors is a myth.
There are no such directors. We have slavishly followed the American model to enshrine it in the law. As recent events have demonstrated, the government makes no attempt even to pretend that directors are, or intended to be, independent.
In the private sector, there is a pretence that they are truly independent, but that independence is compromised. First by the fact that independent directors are chosen and appointed by the controlling/promoter group. And second by the amount of remuneration they are paid. In several recent cases, the remuneration has been found to be so substantial that it undermines their independence. Recent instances of independent directors failing to act can be seen in Maruti, Sesa Goa, Cairn, Lalit Modi, Coal India and oil marketing companies.
Minoo Mody Mumbai
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