Mumbai, April 6 Sebi chairman Tuhim Kanta Pandey said on Monday that independent directors play a very important role in a company's affairs, and emphasized the need for them to adopt a "constructive approach" when performing their duties.
In comments that came weeks after the resignation of Atanu Chakraborty, an independent director and part-time chairman of HDFC Bank, Pandey said that the role of such directors is far more than just compliance, and also includes functions such as assessing information and insights from management, governance, risk management, and finance.
"There is a need to discuss these matters at the board level. But a constructive approach is needed," Pandey told reporters, answering a specific question about the erosion of investor wealth at HDFC Bank following Chakraborty's resignation.
Chakraborty's surprise resignation, citing discrepancies in values and ethics, caused a sharp correction in the HDFC Bank scrip and eroded investor wealth.
Earlier, speaking at a corporate governance event organized by CII here, Pandey said that independence itself is not the "end objective" for independent directors, but it is a starting point.
"Independent directors are not only there for compliance and pointing out flaws in management, but also to support and find solutions through accountability. They need to keep this responsibility in mind," he said.
The career bureaucrat-turned-regulator said there is a need for capacity building among independent directors, and announced an initiative to work towards this goal jointly with other stakeholders.
Pandey said that capacity building cannot be mandated in a prescriptive manner, but needs to be encouraged, enabled, and supported through collaboration between "regulators, industry bodies, professional bodies, and academic business institutions."
"SEBI will seek to embark on a joint initiative for capacity building of independent directors at scale, with a view to further improve corporate governance," he said.
Boardrooms are dealing with issues of technology and data governance, cyber risks, complex financial structures, and regulatory developments that cut across disciplines, and it is "unrealistic" to expect that every director will be equipped with all these perspectives.
A one-time induction or a capacity building program is not sufficient, Pandey said, underscoring the importance of a continuous, structured, and collaborative approach to learning.
Corporate governance is akin to the nervous system in a body, which may not always be visible, but carries signals across the body.
He added that markets respond sharply to any news flow on corporate governance in a company, and added that Sebi has adopted a "calibrated" approach while framing regulations in this context.