Kolkata, Oct 31 Capital market regulator SEBI is exploring the creation of a capacity-building network involving institutions, professional bodies, academia and industry chambers to strengthen the skills and effectiveness of independent directors amid expanding corporate governance responsibilities.
SEBI Chairman Tuhin Kanta Pandey at a session of the Bharat Chamber of Commerce here on Saturday said the proposed network would facilitate greater interaction among stakeholders and help improve the overall standard of independent directors.
The initiative comes against the backdrop of growing expectations from independent directors, whose responsibilities are increasingly extending beyond regulatory compliance to safeguarding shareholder interests and strengthening business performance.
“We have an idea to develop a capacity-building network for independent directors where all the important institutions, professional bodies, academia and industry chambers come together to upgrade the capacity building of the independent directors system as a whole,” Pandey said.
He said soon a consultative process will be launched.
Emphasising the need to strike a balance between accountability and operational independence, he said SEBI was conscious that regulatory oversight should be proportionate and should not impose an excessive burden on independent directors.
“We should have proportionate oversight on the independent directors and not an excessive burden from the point of view of regulators,” he said.
Pandey said the regulatory framework and corporate governance code already provide several safeguards and empower independent directors to discharge their responsibilities, he said in reply to questions.
SEBI has also been listening to their suggestions on further strengthening these protections.
He said independent directors should be allowed to function without undue regulatory pressure unless there is evidence of misconduct or serious failure to discharge their duties.
“Unless and until the malfeasance is manifest, unless and until you have serious dereliction of duties, we should really allow that independence to operate,” he said.
The SEBI chairman also underlined that the position of an independent director should not be viewed as a cushy assignment or a part-time engagement, given the growing complexity of corporate governance.
He said their role should extend beyond regulatory compliance and include active engagement in improving companies’ performance while protecting the interests of all shareholders, particularly minority investors.
“Independence is not a showpiece. It should result in certain positive outcomes,” Pandey said, citing cybersecurity, artificial intelligence, sustainability and human resource transformation as emerging areas requiring greater board-level competence and oversight.
He added that independent directors must contribute to the long-term growth of businesses, as shareholders, including minority investors, cannot expect returns if the companies themselves fail to improve their performance.
On the regulatory front, Pandey said SEBI was looking at streamlining compliance requirements, removing overlaps and reducing the compliance burden through regulatory changes and greater use of technology.
However, he made it clear that certain safeguards would remain non-negotiable, particularly where investor interests are at risk.
Serious concerns relating to related-party transactions (RPTs), for instance, could adversely affect investors and would require close regulatory attention, he said.
Pandey said evolving an appropriate balance between regulatory oversight and the independence of directors would require sustained dialogue with companies and institutions.
(PTI News)
