Independent directors not really independent: Report

New Delhi: A significant percentage of individual shareholders believe the constitution of the board of directors of most Indian companies is tilted towards promoters as many independent directors are not really independent, says a survey.

According to the Corporate Governance Survey 2020 by online platform LocalCircles, 79 per cent individual shareholders have expressed concern about the independence of independent directors.

LocalCircles conducted the survey after observing citizen posts on corporate governance over a 12-month period. The survey received more than 48,000 responses from 21,000 unique shareholders located across 272 districts of India. As many as 65 per cent of individual shareholders said that independent directors in publicly traded Indian companies are not acting to protect the interest of minority shareholders, the survey said.

Further, the top-3 concerns of individual shareholders of publicly traded companies are accounting fraud, selling of company assets without shareholder knowledge and insider trading, it added. Insider trading is the illegal practice of trading on stock exchanges to one's own advantage after having access to confidential information which is not available with the common shareholder.

"If these issues are addressed not only will Indian markets and corporates earn increased public trust they will see many more common citizens investing some of their savings in equities," LocalCircles said. It further noted that if corporate governance of Indian companies improves, it will most definitely attract an increasing number of foreign institutional investors into Indian markets. The role of independent directors has come under question many times over the last few years. Alleged frauds at IL&FS, PMC Bank and Amrapali Group have been questioned as to how in some of these cases even seasoned directors were not able to foresee them.