What’s SEBI’s next big governance push? Focus shifts to independent directors

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Monday said the next phase of corporate governance reforms will focus on building the capacity and effectiveness of independent directors rather than adding more regulatory layers.

Addressing the CII Corporate Governance Summit, Pandey said while India has created a “robust skeletal structure” of governance through stronger disclosures, board independence norms and accountability mechanisms, gaps persist in how these frameworks translate into real outcomes.

“The next phase of governance is not about adding more layers — it is about strengthening the quality of engagement within the existing framework,” he said.

He pointed out that despite well-constituted boards and improved disclosure standards, challenges remain in terms of effectiveness, depth of engagement and truly independent decision-making.

“Boards are well constituted, but not always equally effective. Information is available, but not always interrogated deeply. Independence exists in form, but may not always translate into independent perspective,” Pandey noted.

Placing independent directors at the centre of the next reform cycle, the SEBI chief said their role is becoming increasingly complex as they are expected to provide oversight, challenge management and safeguard minority shareholder interests without direct operational visibility.

He highlighted a wide variation in how independent directors function — with some actively engaging and adding value to decision making, while others remain constrained by limited access to information and reliance on management narratives.

“Independence, by itself, is not the end objective. It is the starting point,” he said.

Pandey stressed that independent directors are not only meant for compliance but also to contribute to long-term value creation, innovation and strategic direction.

Calling capacity building the “next frontier” of governance, Pandey said boardrooms today are grappling with increasingly complex issues such as technology disruption, cyber risks, sustainability and evolving regulations.

“It is unrealistic to expect that every director will come equipped with all these perspectives… what is required is a continuous, structured, and collaborative approach to learning,” he said.

He outlined key areas for improvement, including domain-specific orientation, peer learning platforms, continuous upskilling and access to knowledge networks such as best practices and case studies.

Pandey said SEBI plans to work with industry bodies and institutions to roll out capacity-building initiatives for independent directors at scale.

“SEBI will seek to embark on a joint initiative for capacity building of independent directors… to further improve corporate governance,” he said.

The SEBI chief’s remarks come against the backdrop of heightened global uncertainty, including geopolitical tensions and supply disruptions, which he said are testing businesses, governments and regulators alike.

“Markets can absorb business risk, but they respond sharply to governance uncertainty,” he said, underlining the need for stronger boardroom judgment and responsiveness.

He said that governance must evolve from a compliance-driven approach to one that emphasises insight, transparency of intent and long-term sustainability.

Pandey said corporate governance reform is entering a new phase — moving beyond building structures and processes to strengthening the people who operate them.

“If the first phase of governance reform was about building structures, and the second phase was about strengthening processes, then the next phase must be about building capability,” he said.

He stressed that the effectiveness of governance will ultimately depend not on the breadth of regulations, but on the “quality of questions asked in boardrooms” and the ability of directors to act on them.