The appointment of Independent directors is a corporate governance strategy to ensure transparency, good governance, interest of all stakeholders and prevention of frauds. After corporate frauds such as the Satyam Scandal, Tata-Mistry fiasco, IL&FS fraud, Jet Airways, etc. there were mass resignations by independent directors which led to the questioning of their position and power in a corporation. Thus, the true independence of independent directors has been under scrutiny over the years. Their liability in case of a default or fraud remains unclear. This paper will analyse the development in laws related to independent directors over the years and the effectiveness of the recent amendments bought in by the Securities and Exchange Board of India to address pressing issues related to independent directors. The paper argues that certain aspect of the law related to independent directors still needs to be amended due to the fact that it is inherently a difficult challenge to ensure that an independent director is truly independent.

More and more, the agenda of corporate governance reform has been calling for a dramatic change in the composition and structure of boards of publicly traded companies, with particular criticism reserved for the role of independent directors. This timely, ground-breaking book takes a new and rigorous approach to this important issue. Investigating board independence from a distinctly original perspective, the author's systematic analysis explores the effective interaction of such aspects as the following: What specific functions are expected of independent directors? How these functions fit with the unitary board structure? Why independent directors are seen as inherently necessary for corporate governance? Whether board independence can be compatible with other governance mechanisms? How mainstream company law is applied to independent directors. The analysis leads to a series of solutions designed to eliminate the real and perceived obstacles to the proper functioning of independent directors. In the process, the author discusses such critical 'moments' in corporate governance as monitoring, public relations, social responsibility, shareholder activism, the danger of 'groupthink', remuneration, collective liability, and codes of conduct. The discussion and analysis chart a course through which independent directors can better serve the goal of improving the system of corporate governance. As such, it will be greatly appreciated by investors, corporate counsel for institutional investors, and policymakers and academics in relevant areas of both business and law.

The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. - Concentrates on underlying principles that change little, even as the empirical literature moves on - Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces - Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field's substantive findings, all of which help point the way forward

The Confederation of Indian Industry (CII) has issued guidelines on Independent Directors' Appointment and Board Assessment, which is divided into two parts: ‣ Part A: It focuses on appointment and succession planning, emphasizing diversity and clarity in roles ‣ Part B: It guides efficient Board Evaluation processes This article aims to discuss the CII guidelines and their impact in a summarized manner, which includes: ‣ Stress the importance of clear responsibilities, continuous succession planning, diversity in board composition, insurance coverage, and fair compensation for Independent Directors ‣ Recommend formalizing indemnity and insurance agreements, aligning compensation with responsibilities, and disclosing action taken based on evaluations ‣ Aim to enhance board effectiveness, mitigate risks, and promote transparency in corporate governance

Things will always go wrong in organisations. The question is how quickly will they get caught and put right? The problem facing every organisation today – our businesses, universities, health services, or the many other sporting and charitable institutions that shape our society – is that the relationship between their executive management and those whose job it is to oversee them (whether they are called non-executive or independent directors, trustees, or governors) has become unbalanced. The Independent Director in Society shows how to rebalance it. Based on original, in-depth research from Henley Business School, this is the first book to survey and analyse the governance crisis right across society rather than just focus upon the business sector. The authors show that – despite their many differences – all organisations have many issues, behaviours and problems in common. The same problems require, in many cases, the same solutions. Sometimes they don’t. The authors offer two answers. The first lies in the realm of policy. Not a need for more legislation, but a move to give the existing codes of practice back their teeth and make them fit for purpose. The second lies with independent directors themselves. Urgent improvement is needed in standards of thought and action as well as the calibre of these directors. Above all, directors need to develop an independent mindset that will enable them to make better, more accurate decisions. There are many elements to creating this culture, including selection, training and education for directors, and support from chairs and executive teams, but most of all directors themselves must recognise their responsibilities in a complex and volatile world.

Recommendations of codes on board independence do not match the predictions of optimal board structure theories. We investigate whether firms solve this tradeoff between optimal and recommended levels with gray independent directors, those who do not achieve the formal requirements of independence. We find that in many firms that comply on the proportion of independents, gray independent directors are necessary to reach the recommended level. Additionally, our results show that gray independent directors provide real board independence, suggesting that these directors are not used to solve the mentioned tradeoff. Our results also indicate that firms prefer to bear the cost of non-compliance rather than the cost of deviating from their optimal level of board independence. The empirical analysis, performed in an institutional context in which large controlling shareholders are predominant, indicates that ownership is the most relevant factor to explain optimal board structures.

In this paper we analyse and quantify the extent to which corporate disclosure for the financial year 2003 allows for verification of the independence of directors formally identified as independent by the 40 Italian blue chips. In order to do this, we used as a benchmark the voluntary independence requirements of the Italian Corporate Governance Code (Preda Code, 2002) and the voluntary independence requirements of the EC Recommendation (2005) on non-executive and supervisory directors (a proxy for international best practice). This is a new methodology that can be applied equally to any other country: to our knowledge so far nobody has systematically verified whether listed companies in fact apply the independence standards they declare that they follow. We find that, for the two key independence requirements of not having business relationships with the company and not having too many concurrent commitments outside the company, the level of compliance is dramatically low: 4% and 16% respectively. Overall, it is possible to verify compliance with all the Italian independence standards for only 5 out of the 284 directors formally identified as independent by their companies, and for only 4 directors with respect to the EC standards. The results of this study bring into question the effectiveness of securities market monitoring and call for further quantitative analysis of corporate governance.

About a decade ago, Taiwan introduced the institution of independent directors, which has long been advocated as a good corporate governance practice in the United States of America (“U.S.”). At the time, the concept of independent directors then was a whole new legal idea in Taiwan that fundamentally changed the original intention behind the internal corporate governance system in the Taiwan Company Act in which supervisors were supposed to address oversight and to take action against the board of directors and managers. Traditionally, the U.S. corporate conventional wisdom argues that independent directors benefit companies in some aspects, but it is also believed that they could face some inherent limitations while carrying out their monitoring tasks. The most serious issue is how to ensure an independent director has true independence from management. In addition to the limitations that U.S. independent directors normally face, Taiwanese independent directors also encounter other constraints arising from characteristics of Taiwan's business environment. This article argues that independent directors in Taiwan have few chances to rid themselves of the controlling shareholders' influence. Even in the absence of such powerful shareholders, they would still encounter other difficulties in carrying out the monitoring tasks such as insufficient information. This article concludes that as a result, Taiwanese independent directors will function in a very limited way, and can hardly be effective monitors for Taiwanese companies under the current business and legal environment in Taiwan.

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