Ex-SEBI Chairman Ajay Tyagi criticises independent directors for quitting on flimsy grounds, calls them gatekeepers for good governance

June 3, 2023

Tyagi appealed to the independent directors to disclose the real reason for resigning.

The role of independent directors has been constantly under fire. Recently, the Reserve Bank of India Governor Shaktikanta Das said “individual directors should not have any conflict of interest which may hamper their objectivity and independence.”

Perhaps taking a cue from the RBI governor's statement, Divya Momaya, founder, MentorMyBoard chose the theme: 'Transform India Through Good Governance' for the 3rd Independent Director Summit 2023.

Speaking at the event in Mumbai on Friday, former SEBI chairman Ajay Tyagi said “Independent directors are gatekeepers to ensure better corporate governance”. He feels that the Independent directors have lots of responsibilities.

He also criticised them for resigning on flimsy grounds. Tyagi said often times independent directors resign on health grounds from a company which is not doing well. And interestingly, he said, they continue to be on the board of several other companies. Tyagi appealed to the independent directors to disclose the real reason for resigning. This will go a long way in creating good corporate governance practices. There needs to be transparency and accountability, he said.

The other point he touched upon was appointing independent directors to meet the statutory requirements. He feels that the corporate governance must be implemented in spirit not in letter. Likewise women directors account for 11 per cent of total board strength across all companies in India whereas in Europe they account for 25 per cent.

His parting advice to independent directors was that they should know how to read a balance sheet; and have to keep their eyes and ears open to detect related party transactions of listed companies which may have 100 subsidiaries.

[The Free Press Journal]