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Will screening test for independent directors improve corporate governance?

The government cannot and should not intervene in the appointment of directors in non-government companies, writes the author

Topics
corporate leadership | corporate governance | Independent directors

Asish K Bhattacharyya 



Asish K Bhattacharyya

Even after almost seven years of the enactment of the Companies Act, 2013, the standard in the lower rung of listed companies has not improved significantly. Promoters and dominant shareholders who control family businesses still believe that having outsiders (read independent directors), who do not have skin in the business, is a necessary evil. Any new regulation to strengthen the institution of fails because of this attitude of dominant shareholders. They adopt the ‘tick-the-box’ approach. Often those companies appoint dummy directors to comply with the requirements of the Companies Act and Sebi regulations, and the ‘shadow director’ take the decisions. It is not uncommon that they appoint low-level employees and inexperienced family members.

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First Published: Sun, November 10 2019. 20:02 IST

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