Independent directors a 'puzzle', says Sebi Chairman Ajay Tyagi

Describing independent directors as a "puzzle", Sebi Chairman Ajay Tyagi on Wednesday urged such directors resigning from boards of companies to flag corporate governance concerns if they have any.

Independent directors have an important role to perform as they are a voice of the minority shareholders and added that in the last two-three years, Sebi has seen a rise in the number of resignations of such people.

"If any such resignation is on account of governance concern, considering the role of, and expectations from, independent directors, I urge the resigning independent directors to come forward and state the same clearly to the public at large," Tyagi said at an event organised by industry grouping CII.

He also said that the directors are mandated to give reasons for their resignations within seven days and go beyond "cryptic" writing to detail out an exact reason for their move.

Tyagi admitted that the independent directors are a "puzzle" which the Sebi is trying to deal with as it attempts to strengthen the overall systems.

India Inc has faced frauds over the last few years and regulators have been making efforts to strengthen the corporate governance standards.

"... the whole thing that they (independent directors) are the voice of the minority shareholders, to what extent should they be accountable and responsible, how they fit in into the board structure, which type of people should be taken" are among the issues Sebi is grappling with, Tyagi said.

According to him, industry groupings like CII, which is at present headed by banker Uday Kotak who had drafted the code on corporate governance, will play an important role.

The industry bodies have to self-regulate, introspect more and set higher standards on corporate governance, Tyagi said. Investors, including institutional and retail, also have an important role to play and need to participate in the voting processes more actively, he added.

Similarly, auditors, credit rating agencies, debenture trustees and proxy advisors also have an important role to play in upping the overall standards and helping usher reforms, he noted.

Further, Tyagi said that reforms should not be limited to a radical change alone and stressed that small, incremental changes also constitute reforms.

He said reform steps do not always come out of the difficulties faced in operating but can also be attributed to an urge to prevent any mishap from happening in the future.

Sebi's approach to reform is one of being progressive, open-minded and forward-looking regulator, Tyagi said, adding that this involves constant introspection, interaction with stakeholders, learning from experiences, following best global practices and adapting quickly.