SEBI nudges independent directors toward solution-oriented roles

SEBI nudges independent directors toward solution-oriented roles

The remarks of Tuhin Kanta Pandey came weeks after the resignation of Atanu Chakraborty, chairman of HDFC Bank

The Securities and Exchange Board of India (SEBI) chairman, Tuhin Kanta Pandey, has highlighted the significance of independent directors in corporate functioning. He suggested they adopt a “constructive approach” while carrying out their duties.

In remarks delivered weeks after the resignation of Atanu Chakraborty, an independent director and part-time chairman of HDFC Bank, Pandey emphasised that independent directors must go beyond procedural oversight. Their responsibilities, he noted, included evaluating management inputs, governance standards, risk frameworks and financial performance.

Regarding concerns around investor wealth erosion at HDFC Bank after Chakraborty’s departure, Pandey said, "There is a need to discuss such matters at the board with a constructive approach. Shareholders and other stakeholders of a company are influenced by a company's performance and market cap.”

The unexpected resignation of Chakraborty, who cited differences in values and ethics, triggered a decline in the bank’s stock price and impacted investor wealth.

Earlier, speaking at a corporate governance event organised by the Confederation of Indian Industry (CII), Pandey clarified that independence should be seen as a starting point rather than the ultimate goal.

The bureaucrat-turned-regulator added, "Independent directors are there not only for compliance and pointing fingers at management, but also to support and find solutions through accountability. They need to bear this responsibility in mind.”

Calling for stronger institutional capabilities, Pandey underlined the importance of building capacity among independent directors and announced a collaborative initiative involving multiple stakeholders. The emphasis, he suggested, should be on enabling rather than mandating such efforts.

The SEBI official stressed that meaningful capacity building would require cooperation among regulators, industry groups, professional bodies, and academic institutions. "SEBI will seek to embark on a joint initiative for capacity building of independent directors at scale with a view to further improve corporate governance," he said.

Modern boardrooms, he observed, were grappling with evolving challenges such as technology risks, data governance, cyber threats and complex financial systems. Therefore, expecting every director to possess expertise across all domains was impractical.

He further stressed that learning must be continuous rather than limited to initial training programmes and advocated a structured and collaborative approach. He said that it would better equip directors to navigate an increasingly complex environment.

Pandey described corporate governance as the nervous system of an organisation, often invisible but vital for transmitting signals. He explained that SEBI had adopted a ‘calibrated’ regulatory approach in this area and markets had reacted sharply to governance-related developments.