The Role of Independent Directors in Corporate Governance - A Critical Study

Abstract

The phrase corporate governance was coined in 1984 by Robert Ian Tricker (Bob Tricker) in his first book Corporate Governance, the conflict has existed since then. Corporate governance has been a much-discussed topic and a critical factor for investors worldwide during the past 10-15 years. Throughout the early twentieth century, investors and governments began to demand improved governance procedures from all firms, especially in the aftermath of widespread exposure around corporate scandals. The independent director does not have an absolute connection with the business, which may impair their ability to exercise independent judgement. One might argue that an independent director cannot be a non-executive director who assists the company in enhancing its credibility and governance standards. Board independence is essential to ensuring that the board acts fairly and keeps management responsible to the business. According to the company's board of shareholders, the purpose of independent directors is to guarantee that shareholders' interests are protected and to influence management's activities in order to maximise shareholder value. To guarantee the tranquilly of such goals, it is essential to consider the board composition in terms of underlying objective performance and corporate governance independence. On the other hand, the literature study demonstrates that the Board of Directors is unable to defend shareholders' interests owing to a lack of openness and disclosure in board procedures, and promoters' majority ownership. However, recent frauds and the involvement of independent directors in them raise serious concerns. As a result, the researcher in this article analysed the idea in relation to the function of independent directors and contemporary scams in order to determine the significance of independence in corporate governance for independent directors, which serves as the paper's concept. The researcher hopes to provide some insight on the subject of "Independence of independent directors is significant in corporate governance" in this research. And "It is shown that the independent director position is beneficial in corporate governance."