WITH the intention of reinforcing the role of independent directors, the regulator of securities market has recommended a few changes in the rules dealing with their selection, removal and remuneration and their part in the audit committees of a listed company.
A consultation paper of SEBI, uploaded on its website, also suggests that independent directors’ resignation letters be fully revealed to stock exchanges. SEBI said these suggestions were provoked by worries around the efficiency of independent directors and the need to fortify their autonomy and effectiveness to safeguard minority investors. The regulator has invited remarks from the public until April 1, 2021.
According to the Companies Act, at least one-third of the board of directors in a listed corporate entity who do not possess significant financial interest in it must be neutral or non-executive directors. They are appointed for five years. With their impartiality, knowledge and expertise, independent directors are expected to look into the welfare of minority stakeholders. They should also act as bridges between the minor, unvoiced shareholder and the management to contribute to healthier corporate governance.
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