Will screening test for independent directors improve corporate governance?

Even after almost seven years of the enactment of the Companies Act, 2013, the corporate governance standard in the lower rung of listed companies has not improved significantly. Promoters and dominant shareholders who control family businesses still believe that having outsiders (read independent directors), who do not have skin in the business, is a necessary evil.

Any new regulation to strengthen the institution of independent directors fails because of this attitude of dominant shareholders. They adopt the ‘tick-the-box’ approach. Often those companies appoint dummy directors …

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