Directors - Independent, and thinking together

Who are Independent directors?

Independent directors are non-executive directors of companies who do not have a financial or material relationship with the Company. The role of independent directors is to be a sounding board for compliance and act as a governance watchdog. Independent directors are frequently criticized for plenty of reasons. For instance, a fully independent board can become less effective because it works with insights transmitted to the board via the CEO, which can introduce systematic noise that results in relatively poorer information. However, they are expected to oversee numerous aspects, including strategy, financial reporting, governance, risk management, regulatory compliance, and growth prospects.

Is there a debate?

Amidst debates of whether fully independent directors are suitable for the smooth functioning of an organization or not, it is essential to comprehend the related issues faced by them and what responsibilities are expected from them in the current environment.

Among the debates over whether independent directors are truly independent, it is crucial to consider their responsibilities and expectations in the current environment. Being a non-executive director, an independent director may have limited information visibility. However, they are expected to look at countless factors, including strategy, financial reporting, management, disaster risk management, regulatory compliance, and growth prospects. With recent incidents of lawlessness - air scandals, data breaches, leaks, and misrepresented facts - expectations for independent directors appear to be growing sharply.

Some of the following may raise questions about the broad role of the independent director as they continue to be difficult for external management.

a)????The departure of senior executives

b)????With the onset of today's start-ups, many executives are stepping down from their companies to the business sector or abandoning personal growth prospects or because of differences in philosophy/strategy with promoters/owners. The tendency of senior management representatives, event timing, and the long-term impact on business prospects are essential factors affecting the organization. Quality issues and disclosures.

c)?????In the emerging compliance category, alleged breaches of quality and disclosure standards may affect company products and compliance requirements. This can also affect the Company's chances and reputation.

d)????The number of users and the eligibility for technical updates or application-based tools are increasing. With this, fraudulent users and false reviews are increasing and can disrupt the Company's performance or its prospects. Confidential transactions / leaks / disclosures

e)????Companies are increasingly being called names through leaks and media coverage. This leak and disclosure of the media examine various aspects of confidential or misrepresented deals by the Company, senior management, or promoters. Some of these feats may have specific details that require a series of questions and understanding to gather specific facts. Food prices / international regulatory claims: International companies have to face various legal challenges. The legal complexity surrounding the pricing process and the legal inconsistency concerning contract management have a significant impact on the prospects and reputation of the Company.

To elucidate

The Independent Director serves as the Company's guide, trainer, and advisor. The role includes enhancing corporate loyalty and management standards by acting as a vigilant person and assisting in risk management. In addition, independent directors are responsible for ensuring good governance by participating actively in the various committees established by the Company. Independent directors are needed to perform the following key roles: Be prepared to withstand the pressure of ownership Fill in the vital role in planning. In matters such as strategy, performance, risk management, resources, key appointments, and standards of conduct, they should support others in obtaining an independent judgment to conduct board discussions. While evaluating the performance of the board and the management of the Company, one needs to bring an idea of purpose. Protect the interests of all stakeholders, especially small shareholders.

When we see to the independent directors, they act as a guide, coach, mentor to the employees of the Company. This role includes improving corporate credibility and governance by working as a watchdog, and they also help manage the risk; they are also responsible for ensuring better governance by actively taking part in various committees formed by the board of the Company.

Activities performed by Independent directors

Independent directors perform activities like:

??????i.?????????Fulfil a helpful role in succession planning.

????ii.?????????On issues such as strategy, performance, risk management, resources, key appointments, and standards of conduct, he or she must support gaining independent judgment to bear the board's deliberations.

???iii.?????????While evaluating the performance of the board and management of the Company, he or she needs to bring an objective view.

???iv.?????????Scrutinizing, monitoring, and reporting management's performance regarding goals and objectives agreed in the board meetings.

?????v.?????????Safeguard the interests of all stakeholders, particularly the minority shareholders.; Balance the conflicting interest of the stakeholders.

???vi.?????????Check on the integrity of financial information and ensure financial controls and systems of risk management are in operation.

?vii.?????????In conflict situations between management and shareholder's interest, aim towards the solutions in the Company's best interest.

?viii.?????????Establishing suitable levels of remuneration of executive directors, key managerial personnel, and senior management.

Board members can maturely handle the conflicts between themselves or between themselves and management; it is very destructive if the board member does not attempt to get everyone back together and move forward.

Social aspects of non-executive directors

The social aspects of non-executive directors are different from that of executive directors as the executive directors know about the business and each other better than the non-executive directors know. Although non-executive directors are in the same position as executive directors, they are unknown to each other as they meet often.

They have a conflicting role because as a member of the audit committee, some have to work on financial reports of the Company, as a member of the remuneration committee, they have to look at the pay of the executive board, and as a member of the board, they have to look at the corporate governance also.

To sum up

The directors are the Company's heart and soul, and they are the key to its success. Because increased power comes with greater responsibility, corporate management should be in the hands of responsible people who can utilize their authority correctly.

Submitted by- Student Forum RDIAS