Independent Directors - necessary evil or angel in disguise???


#1

What exactly is an independent director doing on a board? It’s not as if they have any materialistic attachment to the company.

Why provide them a hefty sum just to sit on board?

Of course as a director they may have voting rights on important decisions / they may even safeguard investor’s money if director’s plan on being rash… but as normal politics goes can’t their votes be swayed?


#2

An independent director’s main job is to challenge the direction and policies of the company and the management and even provide counsel and advice to the management when needed. They are basically there to improve the efficiency and they are appointed by the shareholders, not the management. They are basically paid just 0-1L but can make most of their money from commisions(0-1% of net profit) and its appoved by the shareholders not the management.
But yes, their votes can be swayed and that’s corruption, like something what happened in case of ICICI and Fortis and that’s why its important for shareholders to appoint with good reputation and past experience and to do proper due dilligence and make sure the person has no prior relation or deal with the management