Importance of Corporate Governance for Independent Directors

By Admin on 2025-08-23

Corporate governance refers to the set of principles and practices that ensure a company is managed responsibly and ethically. Independent Directors play a critical role in establishing governance standards by ensuring accountability, fairness, and transparency. They are expected to participate actively in audit committees, nomination committees, and risk management oversight. SEBI’s LODR regulations emphasize their responsibility in protecting minority shareholders’ interests. Strong governance leads to enhanced investor confidence, reduced risk of fraud, and sustainable long-term growth. Independent Directors act as the conscience keepers of corporate boards, ensuring ethical conduct and compliance.

📌 Example: In a listed company, an Independent Director on the Audit Committee may question why the auditor has overlooked a sudden jump in revenue without corresponding cash inflows. Raising such issues helps detect potential fraud early.