Rising Cost of Independent Directors and Impact on Corporate Governance

Mr. Himanshu Tiwari
DOI:

Abstract

This paper discusses the role of independent directors in modern corporate governance by ensuring accountability, transparency, and ethical management. It also explains the primary functions of the independent directors which are oversight of objectives and independence from the company’s management. This paper also urges how independent directors protect the interests of stakeholders by making transparent decisions. It also deliberates the contribution of independent directors in corporate governance by providing their expertise in decision-making, enhancing board diversity, and mitigating conflict of interest. This paper also unleashed the evolution of corporate governance in India based on the evolution of the different committees and the laws that govern independent directors. In it the effect of having a good ability of independent directors, the importance of diversity of independent directors, the independently made judgment’s impact on the governance, effective functioning of the combination of executive directors, the constitution of the board by the audit committee and the remuneration committee. This paper also emphasizes the impacts on the governance of the corporation of having an independent director as unleashing the effective functioning of the company, enhancing credibility as well as the supervision of independent directors. It also has some highlighted situations where there is a requirement for independent directors such as financial distress or a restructuring plan, family-owned business, regulatory compliance, and risk management, enhancing board multiformity, misappropriation of funds as well as fraud, crises management, and conflict resolution in addition to in case of merger and acquisition the pivotal role of independent director in governing the corporate.

Keywords

Independent Directors, Corporate Governance, Non-executive directors, Impact, Facilitation, Conflict of Interest