Analyzing the Independence of Independent Directors

The appointment of Independent directors is a corporate governance strategy to ensure transparency, good governance, interest of all stakeholders and prevention of frauds. After corporate frauds such as the Satyam Scandal, Tata-Mistry fiasco, IL&FS fraud, Jet Airways, etc. there were mass resignations by independent directors which led to the questioning of their position and power in a corporation. Thus, the true independence of independent directors has been under scrutiny over the years. Their liability in case of a default or fraud remains unclear. This paper will analyse the development in laws related to independent directors over the years and the effectiveness of the recent amendments bought in by the Securities and Exchange Board of India to address pressing issues related to independent directors. The paper argues that certain aspect of the law related to independent directors still needs to be amended due to the fact that it is inherently a difficult challenge to ensure that an independent director is truly independent