Chairman Tuhin Kanta Pandey on Monday said independent directors discharge a very important responsibility in a company’s affairs, and underlined the need for them to adopt a “constructive approach” in discharging their duties.
In comments that came weeks after the resignation of Atanu Chakraborty, an independent director and part-time chairman of HDFC Bank, Pandey said the role of such directors is far more than just compliance, and encompasses functions such as assessing information and insights from the management, governance, risk management and financials.
“There is a need to discuss such matters at the board. But a constructive approach (is needed). Shareholders and other stakeholders of a company are influenced by a company’s performance and market cap,” Pandey told presspersons, answering a specific question on investor wealth erosion at following Chakraborty’s resignation.
Chakraborty’s surprise resignation, citing incongruity in values and ethics, caused a sharp correction in the HDFC Bank scrip and eroded investor wealth.
Earlier, speaking at a corporate governance event organised by CII here, Pandey said independence itself is not the “end objective” for independent directors, but it is a starting point.
“Independent directors are there not only for compliance and pointing fingers at management, but also to support and find solutions through accountability. They need to bear this responsibility in mind,” he said.
The career bureaucrat-turned-regulator said there is a need for capacity building among independent directors, and announced an initiative to work towards the goal jointly with other stakeholders.
Pandey said capacity building cannot be mandated in a prescriptive manner but needs to be encouraged, enabled and supported through collaboration between “regulators, industry bodies, professional bodies and academic business institutions.
“SEBI will seek to embark on a joint initiative for capacity building of independent directors at scale with a view to further improve corporate governance,” he said.
Boardrooms are dealing with issues of technology and data governance, cyber risks, complex financial structures and regulatory developments that cut across disciplines, and it is “unrealistic” to expect that every director will be equipped with all these perspectives.
A one-time induction or a capacity building programme is not sufficient, Pandey said, underscoring the importance of a continuous, structured and collaborative approach to learning.
Corporate governance is akin to the nervous system in a body, which may not always be visible, but carries signals across the body.
He added that markets respond sharply to any news flow on corporate governance in a company, and added that SEBI has adopted a “calibrated” approach while framing regulations in this context.