The strengthening of the role of the Independent Directors in the Companies Act, 2013 is a true example of true legislative consensus. Comment.
The consensus had been arrived at by the Central government after three years of considerations and discussions by a standing committee of the Parliament. It was actually a law which guaranteed scrutiny, discussion and legislative debate. Directors are being increasingly seen as mere agents of the shareholders and are appointed to oversee other managers which also comprise another set of agents. It is a common practice that agents often collude so the new law has been framed to punish both the agents. But independent directors will operate outside the office and will only be present on quarterly meetings and thus whistle blowing will become almost negligible and so will also the responsibility. The independent directors depend on the information which is given to them by the statutory officers appointed by the Board of Directors but these will be paid by the company. Thus, a huge gap the role of these independent directors and the reports of the auditors cannot be matched. They have been given onerous responsibilities but lack tools of implementation. Thus, the governmental regulation is just an over-reaction to the growing incidences of high-end profile frauds. It will only invite trouble for the companies and also keep genuinely conscientious people away from taking on the role of independent directors.
Published: June 18, 2019 | Modified:December 1, 2019