The independence of the Board of Directors of a Company is identified as a crucial aspect of good corporate governance. The bearing of good corporate governance upon various facets of the Company’s working and growth cannot be underemphasized. The model of corporate governance followed in India is majorly an insider model, which is characterized by a cohesive group of insiders i.e., the concentrated shareholding pattern. The dispersed shareholding pattern is a minor fragment. By virtue of the dominance of the concentrated shareholding, there exists a reasonable possibility of exertion of influence by the majority shareholders over the Board of Directors.

The introduction of Independent Directors was but one step towards ensuring the independence of the board and good corporate governance. Having Independent Directors on board would foster transparency pertaining to the functioning of the Company (its Board), inspiring more confidence in the stakeholders of the Company. The independence would resultantly enhance the efficacy of the Company’s performance. Therefore, in a country like India, the institution of Independence directors is of utmost significance towards protecting the impartial functioning of the Board. The concept of Independent Directors has been adopted by India from the US and the UK, where the concept of Independent Directors had originated much earlier.