Up, close, professional

When a listed-entity promoter’s bitter marriage-split is on, it is tumultuous for everyone concerned. The industry often finds itself divided along lines of personal friendships, loyalties, and professional or business relationships. Personal dynamics can permeate corporate spheres, creating factions and alliances. However, the role of independent directors remains straightforward amidst this complexity. Their primary mandate is clear: protect the interests of minority shareholders.

No independent director should aim to win a popularity vote in such a scenario. They have to stand as impartial custodians, committed to preserving the enterprise value of the company. The crux of this mission is safeguarding shareholder welfare and longevity of the entity.

The intrusion into the private sphere and asking probing questions about marital disputes can seem like an awkward exercise in a corporate context. Yet, it is the duty of independent directors to transcend personal discomfort and adhere to the stringent demands of their role. The law mandates a vigilant scrutiny of all aspects impacting corporate governance, regardless of how sensitive or uncomfortable they may be.

The privacy of individuals is equally vital as the dignity and continuity of enterprise. Simultaneously, a business’s sustained success hinges on the seamless continuation of operations. Striking a delicate balance between respecting personal privacy and ensuring the uninterrupted flow of business operations is not only a matter of ethical consideration but also a strategic imperative.

Ownership conflicts become a glaring concern as the estranged couple’s stakes in the company may clash, potentially jeopardising the interests of shareholders. Accusations exchanged between estranged spouses are significant from a listed entity’s disclosures point. Personal allegations, if left unaddressed, can cast a shadow over the company’s reputation. The entwined executive roles held by the promoter and their estranged spouse pose a significant challenge. Independent directors must scrutinise the potential impact on decision-making, ensuring that personal vendettas don’t dictate corporate strategies.

In India, it is an interconnected world of business and personal life. Any silence or ambiguity from the involved parties may be construed as a lack of transparency, undermining investor confidence and tarnishing the company’s standing. Independent directors must demand clarity on the implications of the marital discord on corporate governance. Disclosures should be exhaustive, leaving no room for ambiguity that might be exploited for personal gain. Despite the desire for neutrality and discretion in personal matters, the acrimonious dissolution of a high-profile promoter marriage often compels the necessity of formal disclosures within the corporate world.

Independent directors must discern the boundaries between familial loyalties and professional obligations. Guarding against nepotism becomes paramount, as decisions affecting the company’s future must be divorced from personal dynamics. Independent directors possess the authority to call for a board meeting independently, without waiting for the promoter to do so.

The corporate governance framework places independent directors in a pivotal role. In some instances, they might even find themselves involved in establishing a leadership council or alternative measures to steer the company through tumult.

As the dust settles, independent directors face the challenge of reconstructing a resilient corporate framework. Their role transcends the boardroom, extending into the complicated world of promoters activities that hold influence on their entity dynamics, and stakeholder trust.

Sridharan is a policy researcher and corporate advisor, and Haribhakti is independent director on corporate boards

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