More independence for independent directors
For decades now, both the capital-markets watchdog as also the department of corporate affairs have worked to enhance the role of independent directors (IDs); the Kotak Committee had noted that they form the backbone of the corporate governance framework worldwide as also in India. Apart from the auditors who are to keep vigil on financial transactions, making sure they are kosher, it is IDs who need to keep tabs on the goings-on within a company to ensure everything is above board. In reality, this is next to impossible, given promoters hold an average of 50% of the equity in the top NSE 500 companies—save for the 'professionally' run ones like an ITC or an L&T. Not surprisingly, they run the businesses as their fiefdoms and, given this, it is hard for IDs to blow the whistle as it were. While institutional shareholders are able to get wind of any adverse event, minority shareholders are left clueless. Indeed, the numerous corporate scams of the past decade—and instances of CEOs who have been arrested or charged with impropriety—are evidence that the presence of big-shot IDs has made little difference to the quality of corporate governance. Among the biggest instances of fraud have been Yes Bank and IL&FS and, most recently, the Gautam-Thapar-promoted CG Power, all of which had some big names on their boards.