Independent director search mandates double as the 10-year term limit ends

As per the latest data released by executive search firm Native, over 800 independent directors of 680 listed companies in India will need to retire by March 2024. The study also highlights potential vacancies for independent directors across listed companies, including firms with a market cap below ₹5,000 crores, to be more than 1,200.

This data brings attention to the importance of independent directors and their role in ensuring good corporate governance practices in companies. Independent directors are appointed to the board of directors of a company to provide unbiased opinions and advice on various matters related to the company's functioning. They are expected to provide constructive criticism and act as a check and balance to the decisions made by the company's management.

The Companies Act, 2013, mandates that at least one-third of the board of directors of a company should comprise independent directors. This provision aims to ensure that the board is not dominated by the company's management and that independent directors can act as a safeguard against any malpractices or wrongdoing.

However, the data released by Native suggests that many listed companies may soon face a shortage of independent directors due to mandatory retirements and potential vacancies. This scenario calls for a renewed focus on the appointment of independent directors and the need to attract the right talent to fill these crucial positions.

Companies must make efforts to attract experienced professionals with diverse backgrounds and skill sets to serve as independent directors. They should also consider providing adequate compensation and training to attract and retain the right talent. Additionally, companies should ensure that the nomination and appointment process for independent directors is transparent and free from any conflicts of interest.

In conclusion, the data released by Native highlights the importance of independent directors and the need to appoint qualified professionals to fill these roles. Companies must take steps to attract and retain the right talent to ensure good corporate governance practices and build a culture of transparency and accountability.

Credits: https://economictimes.indiatimes.com/news/economy/indicators/mandates-for-independent-director-searches-rise-2x-as-maximum-allowed-term-of-10-year-comes-to-an-end/articleshow/99388187.cms?from=mdr

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