Curious Case of Independent Chairpersons

With an independent director in the role of a chairperson, the Board gains a valuable perspective that goes beyond the promoter's interests, fostering a culture of checks and balances

- Srinath Sridharan & Shailesh Haribhakti

IN TODAY’S DYNAMIC corporate landscape, the role of independent directors cannot be overstated. Boards require truly competent, knowledgeable, and unbiased individuals to navigate complex scenarios and safeguard the interests of stakeholders.

In Boards led by promoters, the appointment of an independent director as chairperson is essential for upholding principles of transparency, accountability, and effective governance.

This strategic move acts as a strong defence against potential conflicts of interest and ensures a fair decision-making environment. Enlightened promoters play a pivotal role by willingly relinquishing implicit rights and endorsing the appointment of an Independent Chairperson, underscoring their commitment to robust corporate governance.

With an independent director in the role of a chairperson, the Board gains a valuable perspective that goes beyond the promoter’s interests, fostering a culture of checks and balances. This independent oversight helps manage risks, boosts the Board’s credibility, and builds confidence among stakeholders. By placing an impartial figure at the helm, promoter-led Boards not only adhere to corporate governance standards but also showcase a commitment to cultivating a governance structure that is fair, responsible, and conducive to sustainable longterm growth.

The transition to having an independent chairperson can encounter resistance from promoters, as it may be perceived as encroaching on their traditional role within the corporate structure. For many promoters, the chairperson’s position symbolises a central authority and a direct link to the strategic direction of the company. The resistance is often grounded in concerns that separating the chairperson and managing director’s roles diminish their influence and control.