ABSTRACT
In the corporate governance structure of India, the concept of independent directors was developed as an instrument of protection from abusive use of management's powers, from the misuses of a promoter's position and to regain stakeholders' trust. The independent directors are seen as the independent custodians of corporate governance; they have two functions: to fulfill their fiduciary duties under the law and to serve as a relevant moral compass in the boardroom. However, the evidence from the lived experience is that the mere presence of independent directors on boards does not automatically mean there will be effective or ethical governance. The Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 provide an overall robust legal toolkit to support the fiduciary oversight function, but the broadly defined ethical obligations, where they exist at all, lie largely outside of the legal framework and this difference does not account for the expectation placed on independent directors.
The fiduciary obligation obligation itself has been in existence since equitable principle were established prior to being codified in Section 166 of the Companies Act, 2013. Loyalty, care, diligence and good faith provided in that Section, establish the minimum legal standards of accountability to which fiduciary obligations are subject. Independent directors/moral transpositions of fiduciary duty create a moral culpability to act as the conscience of the corporation, based on fairness, integrity and moral courage. A review of the doctrine and theories of fiduciary duty and obligations, suggest a long-standing rigid divide between what is required by law and what is ethically obligatory. The future of governance in India will depend not on expanding statutes, but cultivating an internal sense of moral decision-making.
Key words: Independent Directors, Fiduciary Duty, Corporate Governance, Moral Responsibility
