Independent directors are not independent, says SEBI chief

New Delhi, April 28 

Sharply critical of the existing corporate governance practices, SEBI chief Ajay Tyagi today said “independent directors are not independent” and audit committees are not working but admitted he does not have a solution to fix the lacunae.

Pitching for a “common stewardship code” for institutional investors, he said the worrying part is that there is no such code for these entities once they become significant shareholders in companies.

Tyagi, who took over the reins as markets regulator last month, said there are too many lacunae with respect to the concept of independent directors with many having “no commitment to any cause”.

“I must admit I have no solutions on what should be done but it will be anyone’s case that existing system has lot of lacunae,” he said here.

Mincing no words, Tyagi said, some independent directors are appointed at the mercy of promoters “(with) no prescribed qualifications or procedures, favouritism, (many are from) closed clubs (such as) only those people being in all boards, no commitment to any cause”.

There are people appointing friends just to “fulfil the requirement of the Companies Act (and) SEBI’s listing regulations is not at all working... One needs to really think through these”, he noted.

Taking a strong note of independent directors resigning from Boards of companies without giving proper reasons, the SEBI chief said some of the reasons given are actually fake.

“Many times they conveniently resign, independent directors just resign and I mean that is very odd... You should give reason as to why you are resigning and people say health reasons. Some of the reasons are fake reasons actually,” he said at an event organised by CII.

Touching upon the area of auditors, SEBI chairman said the SRO (Self Regulatory Organisation) structure is not working for them. — PTI