There are multiple reasons why the position of an Independent Director has become a less sought option in today’s era.
As the post of ‘Independent Director’ lost its lustre, not only the private firms but the PSUs have also felt the impact. 274 positions of Independent Directors are vacant in various PSUs, said Arjun Ram Meghwal, MoS for Heavy Industries and Public Enterprises in a reply to a question in Lok Sabha. In order to fill up the posts of Independent Directors in a timely manner, recommendations for filling up 521 positions on the boards of various CPSEs have been made during the last three years, i.e. 2017, 2018 and 2019 (till date), he added.
There are multiple reasons why the position of an Independent Director has become a less sought option in today’s era. Strict compliance requirements and failure in distinguishing their liabilities have made it tedious for Independent Directors to deliver their roles.
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Limited authority in making a meaningful contribution to the firm, while facing the risk of being summoned, investigated, arrested and harassed by investigators and adjudicating authorities, has prompted independent directors to resign their posts in recent years. The situation has discouraged many potentially well-qualified candidates from joining boards of companies.
Independent Directors are required to improve the functioning and effectiveness of the board and to safeguard the interests of all stakeholders. Every listed public company is complied to have at least one-third of the total number of directors to maintain checks and balances and to question the decisions of the board as an independent authority in an impartial manner.
Meanwhile, there are 58 posts of functional Directors in various CPSEs as well, which are currently not filled on a regular basis. Of these 58 posts, 41 are pertaining only to the calendar year 2019, the government. The recommendations of Public Enterprises Selection Board (PESB) are already available in respect of 29 posts of Functional Directors and selection process in respect of 12 posts has been initiated by PESB, it further added.