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BANSOD COMPUTER TYPING INSTITUTE MAIN ROAD GULABARA CHHINDWARA M.P. ADMISSION OPEN MOB. 8982805777

created Mar 3rd 2021, 08:14 by Vikram Thakre


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A set of proposals by the Securities and Exchange Board of India (Sebi), to strengthen the institution of the Independent Director (ID) is a welcome move. Among the changes the market watchdog has suggested is the appointment and removal of independent directors be approved not only by the majority of the shareholders but also by the majority of the 'minority' shareholders. If either of the two resolutions fail, an independent director cannot be appointed or removed. Furthermore, Sebi wants independent directors to be voted in by shareholders at a general body meeting to stymie the current practice of boards appointing IDs as 'additional directors' subject to approval in the next meeting. It also intends to tighten the rules to prevent IDs from resigning on flimsy grounds. For listed companies, a minimum of one-third of the board of directors must be independent, non-executive directors who do not have a material or pecuniary interest in the company. Given their neutrality, experience and knowledge of company affairs, independent directors are supposed to act in the interest of minority shareholders as well as act as a bridge between the small, voiceless shareholder and the management. Overall, they contribute to better corporate governance.  Since the amended Companies Act came into effect on April 1, 2014, Sebi has been pushing for a larger role for the IDs; but it obviously feels more needs to be done. In large listed firms, where the management is sometimes controlled by a family or a sizeable minority group, the institution of the Independent Director is often subverted by appointing those close to the management, and by dangling the carrot of reappointment and large sitting fees. Sebi also needs to bring in stricter rules to protect sitting IDs who may differ with the management. During the battle in the Tata Sons board between the Ratan Tata and Cyrus Mistry, it is a matter of concern that most of the independent directors who differed with the official line found themselves removed. There is only so much Sebi can do, but anything that protects the voice of the minority is a plus for corporate democracy.  
 
 

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