Director Independence in Controlled Companies - The Way Forward
39 Pages Posted: 29 Sep 2017
Date Written: September 28, 2017
Independent directors have been mandated on company boards around the world, without due allowance for local variations in different countries. Designed primarily for dispersed corporate ownership regimes like the US, its efficacy is impaired in jurisdictions where such ownership is concentrated in the hands of controlling shareholders who also don the role of the executive. This paper reviews the virtual impossibility of director independence in such controlled companies and proposes some corrective measures. Among the recommendations are election of such directors exclusively by non-controlling shareholders (with some safeguards against possible abuse of such powers), board process improvements to enable independent voices to be heeded, and enhanced role and responsibilities for institutional investors and external block holders.
Keywords: Controlled Companies, Director Independence, India, Promoters, Institutional Shareholders, Controlling Shareholders
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