Archive · 18 Sep 2025
Why Independent Directors Often Silent on Company Issues
Imagine there are people called independent directors on the boards of big companies who are supposed to keep an eye on things.
Sometimes, they quit, but they often don't say why.
The rules say they should tell the public the real reason, but many just say it's for personal reasons.
Experts think they may not want to cause trouble or don't have enough proof of problems.
It is not uncommon to see directors quit and later join other companies, despite earlier mentioning health or age related reasons for their departure.
This makes it hard to know when there are real problems in the company.
Few independent directors explicitly state governance concerns when resigning.
Most cite 'personal reasons' for leaving, not specific issues.
Regulations mandate disclosure of detailed resignation reasons, often unmet.
Experts suggest directors may avoid conflict or lack definitive proof.
Stock performance of some companies suffered post-resignation of independent directors.
- Who
- Independent directors of listed Indian firms.
- What
- Reasons why independent directors often do not publicly reveal concerns when they resign from their board positions.
- When
- Over the past six years.
- Where
- India.
- Why
- Often due to awkwardness, lack of confirmation of red flags, or citing other generic reasons.
Shareholder Expectations
Director Responsibilities
Transparency
Shareholder Expectations
Shareholders expect independent directors to be transparent about issues.
Director Responsibilities
Directors find it awkward and difficult to reveal issues that could cause conflicts.
- Main Issue
- Independent directors rarely reveal specific reasons for resignation.
- LODR Regulations
- Require disclosure of resignation letters with detailed reasons within seven days.
- Resignation Reasons
- Often cited: personal, health, or no reasons at all.
- Rare Cases
- Only 22 independent directors in six years voiced disagreements when resigning.
- Impact
- Stocks of some companies with resigning independent directors have underperformed.