In the last five years of the NDA regime, the Indian economy witnessed a few major changes - the Bankruptcy Code, GST and some changes in corporate governance regime. Were the changes to the corporate governance regulations by SEBI enough? Did they have the impact that was expected? Recent events in the Indian corporate world have raised one inevitable question - “what were the board members doing?”

Directors, officers and auditors have resigned in a few cases, special and forensic audits have been conducted and the role of audit firms has been scrutinised by Indian regulators (i.e. SEBI, ICAI, MCA and now, NFRA). In the case of the banks, the Reserve Bank of India refused to extend the tenure of CEOs. With very limited role played by proxy firms and minority shareholders in India (unlike in the USA), management is not really worried about corporate governance. There is usually no direct and proven correlation between corporate governance and market price of stock. However, with the above events, it is clear that negative news attributable to poor corporate governance would impact the stock price!

Post Kotak Committee recommendations, recent crisis of confidence in corporate governance has put enormous pressure on independent directors. Independent directors are expected to play bigger and a very active role – that is, beyond attending 4 board meetings and one general meeting. This includes scrutiny of related party transactions, board evaluation, statutory compliance and risk management and constructive participation at the board meetings. Most importantly, independent directors must fulfil their duties effectively in a true independent manner in the best interest of all stakeholders.

With more responsibilities and independent directors becoming subject to legal proceedings (if s/he failed to fulfil his/her role adequately), it is very important that directors should equip themselves to meet the new demands. Being a director no longer a gig for retired people looking for a quiet hobby. With qualified independent directors who discharge their duties diligently, the corporate governance landscape in India could have a break from its past and look different in a few years from now!

Author Profile

Kalpana is a partner at the firm and a solicitor. Her expertise ranges across traditional corporate work, cross border M&A and joint ventures, and commercial work. She is an expert on corporate governance and has advised on board effectiveness, leadership, organizational climate and decision-making. Her expertise led to her being recognised amongst the top 10 women in the Women Ahead List – “Rise of the new Women in Business” by The Economic Times.