Bolstering Director Independence in Controlled Companies in India

25 Pages Posted: 4 Jul 2017

See all articles by Bala N. Balasubramanian

Bala N. Balasubramanian

Indian Institute of Management Ahmedabad; Formerly IIM Bangalore - Centre for Corporate Governance and Citizensip; Indian Institute of Management Ahmedabad

Date Written: June 15, 2017

Abstract

A vast majority of listed companies in India is “Controlled” by dominant shareholders acting also as the executive, directly or indirectly. Most of the legislative and regulatory requirements, however, are based on “best practices” evolved in countries like the United States where corporate ownership is “dispersed” with no identifiable controlling shareholder in management. In this paper, based on my submissions to a Committee appointed in June 2017 by the capital market regulator, Securities and Exchange Board of India (SEBI), I have proposed for consideration some structural changes in the manner of appointment, functioning, and removal of independent directors on listed company boards aimed at further enabling such directors to exercise their independence without undue inhibition in the interest of non-controlling shareholders. Principally, the recommendations seek restraints on controlling shareholders’ voting power in approving appointment and removal of independent directors (and independent auditors), with the rest of the shareholders being exclusively empowered to approve them.

Keywords: Corporate Governance, Independent Directors, Controlled Companies, India, Director Independence, Voting Power, Minority Shareholders, Independent Auditors

Suggested Citation

Balasubramanian, Bala N., Bolstering Director Independence in Controlled Companies in India (June 15, 2017). Available at SSRN: https://ssrn.com/abstract=2995454 or http://dx.doi.org/10.2139/ssrn.2995454

Bala N. Balasubramanian (Contact Author)

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat
India
+919167036140 (Phone)

Formerly IIM Bangalore - Centre for Corporate Governance and Citizensip ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Indian Institute of Management Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat
India
+919167036140 (Phone)

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