As many as 1,393 independent directors resigned from board position in 2019, almost twice the number of resignations seen in 2018 and 2017, according to a report in The Economic Times.
Factors such as increasing liability, fear of frauds, higher number of cases of corporate governance and fear of personal reputation getting tainted have been pointed out as reasons behind the exits.
Citing data from Prime Database-run nseinfobase.com, the report pointed out that in 2017 and 2018, 717 and 767 independent directors gave up the position on the board of companies.
Experts told the paper that one of the reasons behind the rising number of exits is the fear of being held liable for things many of these directors are not even privy to.
Another reason why independent directors are concerned is due to the reluctance of companies on signing up for the Directors and Officers Liability Insurance.
At a time when the number of independent directors is already diminishing, the Ministry of Corporate Affairs' (MCA) announcement in this regard does not help improve the situation. Tests for appointment of independent directors, with a 60 percent cutoff as the criterion for qualification, were recently announced by the MCA.
Reasons cited for resignations include conflict of interest, management rejig and probes by regulatory bodies. Over 550 of the 1,393 directors who resigned this year either did not give any reason or cited unspecified "preoccupation" and personal reasons for their exit.
Meanwhile, over 400 resignations followed retirement or term expiry, the report added. Nearly 120 people showed little or no interest in reappointment. Before taking up or quitting the post of independent directors, more and more people are now consulting legal experts.
