SEBI plans joint initiative to upskill independent directors, deepen corporate governance

“It can certainly be encouraged, enabled and supported — through collaboration between regulators, industry bodies, professional bodies and academic/business institutions,” the chairman said. “And this is where the next phase of evolution lies. If the first phase of governance reform was about building structures, and the second phase was about strengthening processes, then the next phase must be about building capability,” he said.

“As we look ahead, our objective has been, and will continue to be, to create a governance framework that is robust enough to protect investor interests, ­flexible enough to enable business, ­and adaptive enough to respond to changing realities,” he said. But effective governance ultimately depends on how these frameworks are internalised and implemented within organisations, he said.

“Today’s boardrooms are dealing with issues that cut across disciplines:­ Technology and data governance, ­cyber risks, ­complex financial structures, ­regulatory developments. It is unrealistic to expect that every director will come equipped with all these perspectives,” the chairman said.

On the one end, there are experienced independent directors who actively engage, probe, guide, and bring an external perspective that adds real value to decision making. On the other hand, there are highly qualified professionals — domain experts, accomplished individuals — but their engagement is often limited by the information that is presented to them, he said.

“Their understanding of the company is largely shaped by board materials and management narratives. This variation is not necessarily a function of intent. It is often a function of exposure, familiarity and support systems,” Pandey said.

“What we are increasingly observing is a gap — not in intent, not in regulation — but in translation. Boards are well constituted, but not always equally effective. Information is available, but not always interrogated deeply,” he said. Independence exists in form, but may not always translate into an independent perspective.

He said governance is no longer about preventing what can go wrong. It is equally about enabling institutions to respond wisely when uncertainty arises. “Markets, as we know, can absorb business risk. But they respond sharply to governance uncertainty,” Pandey said.

He said the effectiveness of governance will not be merely determined by how comprehensive our regulations are, or how detailed our disclosures become. “It will be determined by the quality of questions asked in boardrooms, the depth of understanding behind those questions, and the confidence to act on them,” he said.

On the West Asia conflict, he said, “we are meeting at a tumultuous time, with war in West Asia choking oil and gas supplies, triggering global price shocks, with severe impact on the world economy. Indeed, this decade, beginning with the Covid-19 pandemic and a series of geopolitical disruptions and unprecedented technologies such as AI, has been testing the nerves of businesses, governments, and regulators.”