Corporate Governance: The Role Of Importance In Corporate Governance

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RELEVANCE OF INDEPENDENCE IN CORPORATE GOVERNANCE: THE ROLE OF INDEPENDENT DIRECTORS – ISSUES AND CHALLENGES AKSHAT PARASKUMAR GANDHI SYMBIOSIS INSTITUTE OF TECHNOLOGY, PUNE 411042-LAVALE, PUNE E-mail: Contact: +91 88888 20195 ABSTRACT- The concept of Independent director has been originated to drive companies towards inculcating the concept of corporate governance in their management. Independent director of the firm plays a vital role in good going of the firm with its best transparency, accountability and truthful disclosure of state of affairs. Companies that have followed the principles of corporate governance have constantly earned high returns with their goodwill in…show more content…
Unable to perceive any promise of personal ad¬vantage from espousing either side of a controversy.” - Ambrose G. Bierce, 19th century American writer INTRODUCTION The principles of good governance are not unknown to the Indian traditions. Today adoption of good corporate governance practices has emerged as an integral element for doing business. Understanding how boards impact on corporate performance is a question central to the corporate governance research agenda. How come we have so many corporate disasters from time to time? How do corporate bosses walk away with obscene packages even when their companies have not done well? Figure 1. Needs of Independent Directors CORPORATE GOVERNANCE: A NEW MANTRA & AN OLD CONCEPT As global business interest in India keeps growing, so does the expectation that Indian companies must play – and be seen to play – by rules that are clear to international investors. Demands have long been heard for greater transparency in the way Indian companies do business. With the Satyam fiasco still fresh in our memories, newspapers and journals have been abuzz with articles and reports proclaiming the need to strengthen our corporate governance systems day in and day out. Corporate governance is the new mantra and an old concept being pursued with a new found…show more content…
In India, it is allowed under the Companies Act on an optional basis, but is rarely utilized. There is, however, no empirical evidence to show that the concept of cumulative voting could be a panacea. The experience on the use of databank of IDs for the selection of IDs has not been very encouraging because there is still a tendency among companies to choose those whom they already know; nobody wants to get a stranger on Board. This is a fact of life. Paucity of competent IDs in India has complicated matters; for example, in the proposed Companies Bill the number of public companies in which a person can hold directorship is as high as 10. Further, IDs can hold office in any given Board for a maximum period of two consecutive terms of five years each; they can even be eligible for reappointment after the expiration of three years of ceasing to become IDs. Currently in India, the quorum can be attained even without IDs and the meetings can go on; the need for the presence of majority of IDs to constitute a quorum was

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