Independent directors quitting over governance issues should state it clearly: Sebi

Sebi chairman Ajay Tyagi on Wednesday said independent directors resigning over governance concerns should come forward and state the same clearly to the public at large. Speaking at the CII Financial Markets Summit, Tyagi said independent directors represented the voices of minority shareholders and constituted an important institution. Tyagi said, “We have observed an increasing trend in the number of resignations by independent directors for the last two-three years. If any such resignation is on account of some governance concern, considering the role of and expectations from independent directors, I urge the resigning directors to come forward and state the same clearly to the public at large.”

In recent times, there have been several instances of independent directors stepping down from boards citing personal reasons. One such example is K N Murali, former independent director of Dhanlaxmi Bank, who had resigned from the bank board citing personal reasons. According to sources, several independent directors exited the company because of corporate governance issues. Later, the bank’s shareholders ousted its CEO Sunil Gurbaxani at its annual general meeting.

Amit Tandon, MD of Institutional Investor Advisory Services, said, “There should be an ecosystem and institutional mechanism for independent directors to be heard.” At the extreme, there should be the equivalent of a whistleblower mechanism, where if an independent director raises a complaint, it should encompass not just the Sebi but other probe agencies like the ED and SFIO, he added.