That rarity becomes clearer when set against the larger picture: In the same period, more than 3,100 independent directors exited the boards of more than 1,500 listed firms for reasons other than superannuation, retirement, demise, or completion of term, according to data shared by market intelligence firm Prime Database.
What gives?
To be sure, most outgoing independent directors—though sometimes resigning over governance concerns or management disputes—offer inadequate explanations like ‘personal reasons’ in their resignation letters.
Experts say many resigning independent directors stop short of giving honest explanations to public shareholders—a breach of the spirit of the Securities and Exchange Board of India’s (Sebi) regulations.
The Listing Obligations and Disclosure Requirements (LODR) Regulations of 2015 mandate that listed companies disclose independent directors’ resignation letters—along with the detailed reasons for the decision to quit—to the stock exchanges within seven days.
The independent director must also confirm that there are no other material reasons other than those provided in the letter.
“Corporate governance issues most certainly exist in Indian corporations. However, independent directors, who are invited by companies to join their boards and also receive a fee for their services, often find it awkward to highlight lapses in their operations,” said Pranav Haldea, the managing director of Prime Database Group.
In fact, the data shows that 80% of them cited either preoccupation, personal reasons, health, or no reasons at all, for leaving in the last six years.
The number of independent directors resigning for personal reasons rose from 121 in 2020 to 132 by the end of 2024, while those quitting due to preoccupation increased from 194 in 2020 to 266 in 2024, according to Prime Database.
“It has also been seen that while some directors step down citing age or health, they soon join the board of another company,” said Haldea.
A similar concern was echoed by another expert.
“Not all independent directors are comfortable disclosing the real reason for leaving. Many simply cite personal or health issues as the reason. It is possible that a director suspects red flags, but may not have enough data points to confirm the red flag,” said Shriram Subramanian, the managing director of proxy advisory firm InGovern Research.
In one case, a director mentioned trying to contact the promoter, but the calls weren’t answered for over six months, said Subramanian, citing the example of Arun Menon, who resigned from the board of Gensol Engineering Ltd in April.
The regulations and guidelines for good corporate governance practices are adequate, but the market regulator needs to be more proactive in enforcing them when instances of poor governance arise, Subramanian said, adding that prompt actions and swift probes are essential to address such issues effectively.
A rare breed
In the last six years, resignations by independent directors over disagreements with management hit a high in 2022, with nine exits.
Only two independent directors—Chaudhary and Menon—have cited clashes with management this year while resigning.
Chaudhary wrote in his resignation letter that “in such an operating environment where dissent is suppressed or sidelined, remaining on the board would compromise both my professional ethics and obligations as defined under Indian corporate governance codes”.
Menon, in his 15 April resignation letter, wrote that he had been flagging high leverage on Gensol’s balance sheet for several months to no avail. “I would like to take you back to last year, July/August of 2024, when I had tried reaching you to seek clarity on the debt position of the company, and had also offered assistance to reduce the interest cost through a debt restructure route,” he wrote in the email addressed to Gensol chair Anmol Singh Jaggi.
In 2024, Marc Desaedeleer resigned from Suzlon Energy Ltd’s board after 12 years due to allegedly lax governance standards, without elaborating further.
Just weeks prior, three independent directors at e-waste recycling firm Cerebra Integrated Technologies Ltd jointly submitted their resignations. They said that after Sebi started investigating whether there was any insider trading in the company’s stock, the audit committee had recommended a forensic check. However, since the audit did not happen despite repeated follow-ups from the independent directors, they chose to resign.
The 22 independent directors who resigned over the past six years were from 13 listed companies. In addition to those mentioned above, they included Yes Bank Ltd, Aksh Optifibre Ltd, PTC India Financial Services Ltd, PTC India Ltd, Prime Securities Ltd, PVP Ventures Ltd, Dhanlaxmi Bank Ltd, VIP Industries Ltd and Sabar Flex India Ltd.
In the case of VIP Industries, Nisaba Godrej stepped down as an independent director due to differences of opinion on leadership accountability and succession planning rather than outright governance concerns.
The stocks of eight of these 13 companies have underperformed compared to the benchmark Sensex since the day the independent directors resigned.
For instance, the KRBL stock has declined over 10% since it made Chaudhary’s resignation letter public on 13 September.
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