Independent Directors: A Flawed Prescription for Corporate Governance

Authors

  •   Arvind Sudarsan Management Group, BITS Pilani

Keywords:

Corporate Governance, Indian Business, Role of Independent Directors, Motivation of Independent Directors

Abstract

This paper examines the concept of the independent director with reference to the agency theory of corporate governance. In the Indian post independence business scenario, events leading to the current situation in corporate governance, the development of demands for independent directors and their role form the basis for the discussion. Arguments for and against independent directors and factors affecting their efficacy are analyzed in depth. Some possible suggestions which might help in mitigating the effects of the factors hindering the effective functioning of independent directors are discussed, clearly recognizing the systemic changes which might be required. Some suggestions also appear to be worse than the problem itself Finally the effectiveness of independent directors is studied. Ultimately, while some solutions are recommended for the Indian situation the conclusion is that independent directors are also agents and cannot ensure corporate governance.

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Published

2010-07-01

Issue

Volume 4, Issue 2, July 2010

Section

Research and Academic Papers

License

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