Increase in the resignation of Independent Directors because of the fear of Reputation and Legal Liabilities
In the current year 2020, about 1,344 Independent Directors resigned from the companies listed on the National Stock Exchange (NSE), a 45% increase from the previous year (2019) and 80% increase from the financial year 2018. While resigning, Independent Directors cited personal reasons as the most common explanation for resigning. Other explanations were health reasons, pre-occupations, conflict of interest, and change of role or disagreement.
Several top level directors have expressed their inability to take up offer as they were apprehensive about their reputation and fearful of legal liabilities because independent directors are now beginning to be held liable for the actions of the promoters and the management.
A senior director while resigning expressed that only a few companies are showing true leadership and governance standards. Another one stated that independent directors, nowadays, are increasingly applying due diligence and judgement before joining a board. Furthermore, it has been added by another Independent Director that appointment of academicians, professionals and bureaucrats as Independent Directors are creating issues because they are showing their lack of exposure at the corporate level.
