Companies Need Qualified Independent Directors, Not Rubber-stamp Directors

By Author: Directors Institute
Total Articles: 7
Comment this article

This phrase compels us to think about how companies have often been victims of the rubber stamp culture.
An important dimension of corporate governance reform has been the introduction of Independent Directors (IDs). The legislators realized that in order to reduce fraudulent activities within a company, it is necessary to appoint someone who can have an external influence on company decisions and oversee the company’s board as an outsider. This is how the concept of IDs was concocted. IDs are presumed to be impartial and fiduciaries of shareholders’ interests. In India and many other countries, 1/3rd of the board directors of a publicly listed company are required to be IDs. They do not have any role to play in executive responsibilities.
Even though the rationale behind having IDs on board is bonafide, in actuality is too idealistic. Anticipations on paper turn out to be different in the real world. A reality check into the corporate world gives us a glimpse at the dominance of the promoters in a company having a concentration of ownership. Especially in Asia, we can see a number of family business groups ...
... rule the corporate landscape. These promoters/family members usually have a substantial ownership stake in the company and thus they can be too ‘controlling’. They will always try to control and manipulate board decisions and extract private benefits for personal gains. And where such concentration lies, the interests of minority shareholders are often sidelined. Corporate fraud and scams often breed in such places.

To know more visit: https://www.directors-institute.com/post/companies-need-qualified-independent-directors-not-rubber-stamp-directors