The Board Of Directors Should Be Strengthened By Appointing Independent Directors Case Study
“The Board of directors should be strengthened by appointing independent directors.”
Efficient Corporate Governance has emerged to be an integral part of running a business in today’s scenario; hence it becomes pertinent to understand the nitty-gritties of the role played by the directors of a company to ensure the same. Over the course of time, and among important developments in corporate governance and company law reform corresponding to the same, have felt the need for independent directors owing to which their presence has become commonplace on the boards of larger public companies around the world along with being a practice of most of the listed companies. Furthermore, the Sarbanes Oxley Act of 2002 and after recommendations from the …show more content…
With rampant globalization, the need have access to global pools of capital, to attract human capital from various countries, has increased and for the purposes of which a transparent board becomes imperative. History bears testimony to the fact that many times the directors are seen to be the only derivatives of benefit. Therefore, there arises a need for ensuring independent members in the board of directors to uphold the principles of corporate governance. Thirdly, an independent director is also instrumental in risk management and review process, meaning, that the role of the independent director is to identity, analyze and exercise economic control over all risks that may/may not threaten the assets, resources and earning capacity of the company. Risk maybe of any kind, like financial strategic etc. Fourthly, it plays a vital role in maintaining and improving the internal functioning, the independent directors act as an advisory body in supervising and monitoring the internal control system and find loopholes in terms of the existing system thereby voicing his/her concerns for the purpose of obviating them. Lastly, they are also expected to ensure that the company is meeting statutory compliances with …show more content…
Firstly, The prime focus was to ensure investor protection through integrity and accountability but the ambit of their scope of work has been much debated upon, the fact as to whether the independent directors are to contribute to the development of corporate strategy, or to review the performance of the management or is their primary concern with regards to protect the interest of the public shareholders by imposing checks and balances over management policies and establishing appropriate controls over the promoters and the management. Secondly, with regards to appointment of an independent director there is no selection procedure per se has been spelt out. On the contrary these directors are selected by the Board of Directors itself bases upon their “expertise and experience.” This stands questioned on account of “independence” of such directors and therefore raises a serious conflict in impartial and independent discharge of duties by the independent director. Thirdly, being a non-executive director, an independent director is generally not involved in the day-to-day activities of the business; the main source of all information is the CEO whereas on the other hand it is his performance that he/she is supposed to monitor. Also, there is no legal protection that
Efficient Corporate Governance has emerged to be an integral part of running a business in today’s scenario; hence it becomes pertinent to understand the nitty-gritties of the role played by the directors of a company to ensure the same. Over the course of time, and among important developments in corporate governance and company law reform corresponding to the same, have felt the need for independent directors owing to which their presence has become commonplace on the boards of larger public companies around the world along with being a practice of most of the listed companies. Furthermore, the Sarbanes Oxley Act of 2002 and after recommendations from the …show more content…
With rampant globalization, the need have access to global pools of capital, to attract human capital from various countries, has increased and for the purposes of which a transparent board becomes imperative. History bears testimony to the fact that many times the directors are seen to be the only derivatives of benefit. Therefore, there arises a need for ensuring independent members in the board of directors to uphold the principles of corporate governance. Thirdly, an independent director is also instrumental in risk management and review process, meaning, that the role of the independent director is to identity, analyze and exercise economic control over all risks that may/may not threaten the assets, resources and earning capacity of the company. Risk maybe of any kind, like financial strategic etc. Fourthly, it plays a vital role in maintaining and improving the internal functioning, the independent directors act as an advisory body in supervising and monitoring the internal control system and find loopholes in terms of the existing system thereby voicing his/her concerns for the purpose of obviating them. Lastly, they are also expected to ensure that the company is meeting statutory compliances with …show more content…
Firstly, The prime focus was to ensure investor protection through integrity and accountability but the ambit of their scope of work has been much debated upon, the fact as to whether the independent directors are to contribute to the development of corporate strategy, or to review the performance of the management or is their primary concern with regards to protect the interest of the public shareholders by imposing checks and balances over management policies and establishing appropriate controls over the promoters and the management. Secondly, with regards to appointment of an independent director there is no selection procedure per se has been spelt out. On the contrary these directors are selected by the Board of Directors itself bases upon their “expertise and experience.” This stands questioned on account of “independence” of such directors and therefore raises a serious conflict in impartial and independent discharge of duties by the independent director. Thirdly, being a non-executive director, an independent director is generally not involved in the day-to-day activities of the business; the main source of all information is the CEO whereas on the other hand it is his performance that he/she is supposed to monitor. Also, there is no legal protection that