Why don’t independent directors call out red flags when they quit?

This rareity becomes clearer when it is determined against the larger picture: in the same period, according to the data shared by the market intelligence company Prime database, more than 1,500 independent managers came out of the boards of more than 1,500 listed firm.

What does it give?

To be sure, most outgoing independent directors – sometimes resigns from governance concerns or management disagreements, but inadequate explanations such as ‘personal reasons’ in their resignation letters.

Experts say that many independent directors who resigned have stopped making honest explanations to public shareholders – a violation of the spirit of the stock market of the securities and India (Sebı) regulations.

The Regulation on List Obligations and Explanation Requirements of the Listing Companies (LODR) Regulation (LODR) Regulation explains to the stock exchanges within seven days, along with detailed reasons for the decision to quit.

The independent director should also confirm that there is no significant reason other than those given in the letter.

“Corporate governance issues are definitely in Indian companies. However, independent directors invited to participate in their boards and get a fee for their services are usually strange to emphasize the tours in their operations, Pran Pranav, General Manager of Prime Database Group, said.

In fact, 80% of data show that there are no worries, personal reasons, health or any reason to leave in the last six years.

According to the Prime database, the number of independent directors who resigned for personal reasons increased from 121 to 132 in 2020 to 132, while those who left due to anxiety increased from 194 to 2024 to 266 in 2020.

“Some executives take steps by referring to age or health, and it is seen that another company has joined the board of directors soon,” he said.

A similar concern was echoed by another specialist.

“All independent directors are not comfortable to explain the real reason for separation. Many states that a director is able to suspect the red flags, but may not have enough data point to verify the red flag, Shriram all independent directors are not comfortable to explain the real reason for separation.

In one case, a director said that he was trying to communicate with the supporter, but in April, the Gensol Engineering Ltd resigned from the board of directors of the Arun menon, the subramanian, was not answered for more than six months.

Arrangements and directives are sufficient for good corporate governance practices, but subramenian added that when examples of bad governance should be more proactive to implement them when they emerge, fast actions and rapid probes are necessary to effectively address such problems.

A rare breed

In the last six years, independent directors’ resignations with management have reached a high level in 2022 with nine outputs.

Only two independent directors – Chaudhary and Menon – resigned this year, referring to conflicts with the administration.

In his letter of resignation, Chaudhary wrote in his letter of resignation, “the opposition was suppressed or sidelin, and in such an activity environment in the board, he would endanger both my professional ethics and obligations as defined under the codes of Indian Corporate Government”.

Menon wrote in a letter of resignation on April 15th that Gensol had marked high lever for several months in the balance sheet. “I have tried to look for clarity about the debt position of the company and offered help to reduce interest rates through a debt restructuring way,” Gensol President Anmol Singh Jaggi said.

In 2024, Marc Desaeedeleer resigned from the board of Suzlon Energy Ltd, 12 years later, alleged to be loose governance standards without further elaboration.

Only weeks ago, three independent director Cerebra Integrated Technologies Ltd presented their resignation jointly at the e-Atık recycling company. Sebı said that the audit committee proposed a judicial control after starting to investigate whether the company had any internal learning trade in the stock. However, despite the repeated follow -up of the independent managers, they chose to resign, since the audit did not take place.

22 independent directors who have resigned in the last six years came from 13 companies listed. In addition to those mentioned above, Yes Bank Ltd, Aksh Optifibre Ltd, PTC India Financial Services Ltd, PTC India Ltd, Prime Securities Ltd, PVP Ventures Ltd, Dhanlaxmi Bank Ltd, VIP Industries Ltd and Sabar Flex India Ltd.

In the case of VIP Industries, Nisaba Godrej resigned as an independent director due to the differences in opinion about leadership accountability and successive differences in succession planning rather than open governance concerns.

Eight out of these 13 companies have performed low compared to Benchmark Sensex since the day the independent directors resigned.

For example, KBL stock fell over 10% because Chaudhary’s resignation letter made the public open on September 13th.