Independent directors will soon have to provide “detailed reasons” for their resignations from boards of listed companies and the same would need to be made public under new norms being finalised by regulator Sebi.
In case of an independent director only citing “personal reasons” for his or her resignation from a company board, the individual may be required to explain the logic behind staying on boards of other companies.
The proposed move is part of new norms being finalised by the Securities and Exchange Board of India (Sebi) for a new set of corporate governance norms for listed companies that are going to come into force beginning October, 2014.
Under existing Sebi norms, there is no provision that requires mandatory disclosure of reasons for an independent director’s resignation from a listed company’s board.
It has been felt that resignation of non-executive directors might be due to their disagreement with the management in certain matters, while there have been many instances where independent directors have quit without shareholders getting to know exact reasons.
In some cases, independent directors have quit after coming across irregularities in the company’s affairs, but their silent departure has failed to serve the purpose of such directors being guardians of good corporate governance.