Post-pandemic churn drives 30% jump in independent director exits to 510: Report

Proxy advisory firms guide shareholders on corporate resolutions, including board appointments.

• 510 independent directors resign from listed firms, highest since 2017
• Smaller companies saw most resignations, textiles sector led among industries
• Governance pressure and new regulations drive director resignations

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Independent director resignations from listed companies have climbed to their highest level since 2017, the earliest year for which comparable data is available.

As many as 510 independent directors stepped down mid-term by mid-December this year, data compiled by primeinfobase.com show.

This marks a sharp rise from 393 exits recorded last year, highlighting a sustained increase since the pandemic period. In comparison, 265 such cessations were seen in 2019, the year before Covid-19 disruptions.

The recent years have brought greater expectations and scrutiny for independent directors. Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services, said the role has come under sharper focus, with directors facing increasing pressure to deliver on governance responsibilities. Proxy advisory firms guide shareholders on corporate resolutions, including board appointments.

Resignations have been attributed to a range of factors, including pre-occupation with other commitments, personal reasons and health issues. Some directors cited regulatory requirements, conflicts of interest or appointments to other boards, while others stepped down due to relocation or age. In several cases, no specific reason was disclosed.

Smaller companies accounted for a significant share of exits. Firms with market capitalisation below Rs 100 crore saw 142 resignations, while those valued between Rs 100 crore and Rs 1,000 crore recorded 191 exits. Less than 12% of resignations came from companies with market capitalisation of Rs 10,000 crore or more.

Amit Tandon, founder and managing director of Institutional Investor Advisory Services (IIAS) India, said shareholder feedback suggests governance standards are generally stronger at larger companies than at smaller ones. He added that board membership is increasingly viewed as a responsibility rather than a privilege.

The churn follows regulatory changes under the Companies Act, 2013, which limit independent directors to two consecutive five-year terms, alongside heightened institutional scrutiny of directors holding multiple board positions. Global and domestic investors have also raised concerns over over-boarding, with international benchmarks significantly lower, Business Standard calculations show.

Textiles saw the highest number of mid-term exits, followed by software and fast-moving consumer goods. While these sectors recorded 30-40 resignations each, exits were spread across more than 60 sectors, with the top five accounting for under one-third of the total, Business Standard noted.