Submit :
News                      Photos                     Just In                     Debate Topic                     Latest News                    Articles                    Local News                    Blog Posts                     Pictures                    Reviews                    Recipes                    
Are "independent" directors appointed by the companies "really independent"?
Companies in India, both in Private Sector as well as Public Sector, are required to appoint the independent directors on their Board in order to ensure the sound corporate governance practices. Necessary provisions have been made by the Government under the Companies Act.

Moreover the listing agreement of Stock Exchange also mandates for the appointment of independent directors. The idea behind appointing the independent directors on the Boards of the Companies was that since the public money is invested in these companies, these independent directors, who are not related to the promoters of the companies, will be able to protect not only the rights of the retail investors, but also will be able to protect the money invested by the public in these companies.

While all this was done with all good intentions, no efforts were made by the Government that the companies are forced to appoint the independent directors in the true spirit of the law framed by the Government. All the companies in the private sector are appointing the independent directors from the persons known to them or referred to them as the friends and associates of the promoters.

Though there is a panel of independent directors available on, a website hosted by Prime Database and jointly sponsored by Bombay Stock Exchange and National Stock Exchange, where details of more than 22000 persons eligible for appointment as independent directors is available, none of the companies in private sector or from the Government Sector uses this data base to select the independent directors for their companies.

There is another data base of independent directors maintained by the Department of Public Enterprises, Government of India for the purpose of appointing the independent directors in Public Sector Companies (commonly known as Government Companies).This data base also has details of 615 persons eligible to appointed as independent directors.

Here the problem is entirely different from the companies of the private sector. The Department of Public Enterprises, by maintaining this data base of independent directors, wants to show that there is complete  transparency in the appointment of independent directors in the Government Companies. 

However, the process of inclusion of the eligible persons in the data base itself is not transparent. The list hosted by Department of Public Enterprises includes retired Government Servants, former CEOs and Directors of the Government Companies, CEOs and Directors of Private Sector Companies and Professors, Academicians and Professionals.

Since the names in this list appear to have been included by the Department of Public Enterprises in the arbitrary manner, there is complete lack of transparency in the preparation of this database itself. More surprising thing is that, even if your name is included in this list (whether it is transparent or not), there is no guarantee that the independent directors will be selected from this list only.

Clearly first you have to make efforts to get your name included in this panel and after your name is included, you will have to make efforts to get yourself appointed as an independent director. Whether any person, appointed in such a manner, will be able to act "independently", is a million dollar question.

There is urgent need for constituting an independent authority for the appointment and regulation of independent directors both in private and public sector companies, so that this authority could maintain a centralized panel of independent directors and appoints directors in the companies out of this panel only. 

Unless this is done, the so called independent directors, both in private and public sector companies, can hardly be said as "independent" as their appointment itself has not passed the test of transparency which is pre-requisite for any appointment of independent director.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
Email Id
Verification Code
Email me on reply to my comment
Email me when other CJs comment on this article
Sign in to set your preference
merinews for RTI activists

Not finding what you are looking for? Search here.