Strategic Oversight & Governance: From Compliance to Courage — The True Mandate of an Independent Director - Sharmilaa Thakur

Sharmilaa Thakur

Sep 29

9 min read

Why “Independent” is not simply a designation — it is a discipline of judgment.

Corporate governance is often easiest to recognise when something goes wrong.

A financial irregularity appears.

A related-party transaction attracts scrutiny.

A major acquisition fails to deliver the expected value.

A whistleblower raises concerns.

A regulatory investigation begins.

A succession plan suddenly proves inadequate.

By then, the questions are usually familiar:

Who knew?

Who approved it?

Who challenged it?

What did the Board know?

What should the Board have known?

These questions take us to one of the most important institutions in modern corporate governance: The Independent Director.

Yet there is an uncomfortable distinction that deserves much more attention.

A director can satisfy the formal requirements for independence and still fail to demonstrate independence of judgment.

Real independence is more demanding:

Close enough to understand the business. Independent enough to challenge its assumptions. Courageous enough to act when the evidence demands it.

What Does “Independent” Actually Mean?

In India, independence is not simply a matter of personal reputation or professional seniority.

Section 149 of the Companies Act, 2013 establishes the statutory framework for Independent Directors, while Schedule IV provides the Code for Independent Directors and sets out expectations concerning professional conduct, objective judgment, Board responsibilities and stakeholder interests.

Schedule IV specifically requires an Independent Director to act objectively and constructively, devote sufficient time and attention to informed and balanced decision-making, exercise objective independent judgment, scrutinise management performance and satisfy themselves regarding the integrity of financial information and risk-management systems.

That matters because it moves the discussion beyond the question:

“Does this person meet the definition of independent?”

towards a much more consequential question:

“Can this person exercise independent judgment when independence becomes uncomfortable?”

That is a very different standard.

The Real Paradox: Independence Requires Proximity

There is a misconception that an Independent Director should remain distant from management.

That would be counterproductive.

A director cannot effectively challenge what they do not understand.

Effective oversight requires an understanding of the:

Business model
Strategy
Competitive Environment
Customers
Financial position
Technology
People and Culture
Operating Realities
Regulatory Environment
Emerging Risks

But the closer a director gets to the organisation, the greater the need to consciously preserve objectivity.

The OECD's G20/OECD Principles of Corporate Governance similarly emphasise the importance of objective Board judgment and recognise the role independent Board members can play where management, the company and shareholders may have divergent interests.

KPMG's recent governance analysis describes this tension particularly well: Boards need sufficient proximity to understand the business, its people and operating realities, while retaining enough independence to challenge optimistic narratives and avoid excessive reliance on influential executives.

So independence is not isolation.

It is disciplined proximity.

What Real Independence Looks Like: Six Boardroom Behaviours

Formal independence creates the foundation.

Behaviour demonstrates whether that independence actually exists.

I would define real independence through six Boardroom behaviours.

1. Ask the Uncomfortable Question

Management presents the first answer.

An effective Independent Director asks:

“What sits underneath that answer?”

Revenue is growing.

Why?

Margins are improving.

What changed?

Attrition is declining.

What does the underlying employee data tell us?

The acquisition is accretive.

Under which assumptions?

The risk is low.

Compared with what scenario?

Good governance is often hidden inside the second question.

The objective is not to create friction.

It is to make sure that important decisions are based on assumptions that have actually been tested.

2. Challenge Assumptions, Not People

Board challenge should not become confrontation.

The purpose is not to “win” an argument with management.

The purpose is to improve the quality of the decision.

The strongest Independent Directors can challenge a proposal without undermining the person presenting it.

That requires intellectual discipline:

Challenge the assumption.

Test the evidence.

Understand the consequence.

Then decide.

The distinction is important.

An Independent Director who challenges everything is not necessarily exercising better governance.

Nor is a director who rarely challenges management necessarily demonstrating effective oversight.

Independence is not permanent opposition.

It is freedom from predetermined positions.

3. Go Beyond the Board Pack

A Board pack is an important source of information.

It should not become the only source of reality.

An Independent Director may need to ask for:

Underlying Data
Trend Analysis
Independent Benchmarking
Scenario Assumptions
Risk Indicators
Control Exceptions
Stakeholder Signals
Employee & Customer Indicators
External Expert Advice

Schedule IV expressly recognises the Independent Director's role in seeking clarification and, where necessary, professional advice.

The objective is not to second-guess management on every operational decision.

It is to ensure that consequential decisions are made on an informed basis.

This distinction becomes particularly important when a Board is presented with a compelling narrative supported by carefully selected indicators.

The question should not only be:

“What does the dashboard tell us?”

It should also be:

“What might the dashboard not be telling us?”

4. Seek Independent Evidence

There are circumstances where management's information should be supplemented by independent evidence.

That might include:

Legal Advice
Valuation Analysis
Technical Expertise
Cybersecurity Assessment
ESG Assurance
Industry Benchmarking
Workforce Analytics
Independent Scenario Analysis
Forensic Review

The purpose is not to create another layer of bureaucracy.

It is to improve decision quality.

The OECD framework recognises that independent Board members can provide objective perspectives particularly in areas where conflicts of interest may arise, including executive remuneration, succession planning, changes in corporate control, major acquisitions, audit and related-party matters.

The Board's responsibility is not to distrust management.

It is to avoid becoming dependent on a single version of reality.

5. Have the Courage to Dissent

One of the most important responsibilities in a Boardroom may be the least visible:

the ability to say, “I am not yet comfortable.”

Schedule IV requires Independent Directors to bring objective independent judgment to Board deliberations, including where that means concurring with or dissenting from the collective judgment of the Board.

It also provides for concerns about the running of the company or a proposed action to be addressed and, where unresolved, recorded in the minutes.

That is not obstruction.

It is governance.

A healthy Board does not require unanimous thinking.

It requires high-quality thinking before consensus.

Consensus should be the outcome of rigorous discussion — not the starting assumption.

And an Independent Director should not dissent merely to demonstrate independence.

The better test is:

Does the evidence warrant challenge?

If yes, the director should be prepared to challenge.

If no, supporting the decision is equally consistent with independence.

6. Know Where Oversight Ends and Management Begins

This is equally important.

Independent Directors are not shadow executives.

They should not run the business.

Management owns execution.

The Board provides oversight, strategic guidance, challenge, accountability and stewardship.

That boundary matters.

Too little oversight creates governance risk.

Too much operational intervention creates a different risk: blurred accountability.

The Board should therefore ask:

“What should we know?”

rather than:

“How should management execute this?”

That distinction enables the Board to remain appropriately engaged without assuming management's responsibilities.

Where Independent Judgment Matters Most

Not every Board discussion carries the same governance risk.

Independent judgment becomes particularly important where interests may diverge.

The OECD specifically identifies areas such as:

Executive Remuneration
Succession Planning
Changes of Corporate Control
Major Acquisitions
Audit
Financial and Corporate Reporting
Related-party Transactions

as areas where independent Board members can play an important role.

But today's Boards face an even broader risk landscape.

Strategy and long-term value

Are strategic assumptions sufficiently tested?

Is the organisation investing for long-term resilience or optimising for short-term performance?

Leadership and succession

Is the organisation overly dependent on one individual?

Does the succession plan exist on paper, or is there genuine readiness?

People and organisational capability

Does the organisation have the capabilities required to execute its strategy?

Is there sufficient leadership bench strength?

Are critical roles overly dependent on a small number of individuals?

People risk becomes Board risk when the organisation's ability to execute strategy depends on capabilities, leadership continuity or critical talent that cannot be easily replaced.

Technology and AI governance

Who owns accountability when AI systems influence decisions?

Are decision rights clear?

Are data, cybersecurity, model, third-party and ethical risks sufficiently understood?

ESG and stakeholder impact

Is sustainability embedded in enterprise risk and capital allocation — or primarily treated as a reporting exercise?

Culture and conduct

Does the Board receive only positive culture indicators?

What happens to people who raise concerns?

Are repeated exceptions treated as isolated incidents — or recognised as patterns?

These questions increasingly sit at the intersection of strategy, risk, people, technology and governance.

The Independent Director as an Early-Warning System

Some risks become visible in financial statements only after they have already become significant.

The early signals may appear elsewhere.

A sudden increase in senior-leadership attrition.

Repeated control exceptions.

Growing customer complaints.

Whistleblower patterns.

Delays in reconciliations.

Frequent changes to assumptions.

Unexplained variance between operational and financial reporting.

A succession pipeline that looks healthy until critical roles are mapped.

A culture in which bad news travels slowly upward.

None of these signals, on their own, necessarily proves a governance failure.

But they can be signals requiring investigation.

KPMG's recent governance analysis similarly highlights cultural shifts, critical-role attrition, repeated control exceptions, inconsistent narratives across functions and other “quiet signals” as potential early-warning indicators for Boards.

It also recommends triangulating Board information through alternative data sources, independent benchmarking and structured engagement beyond the senior leadership team.

This is where an Independent Director can add significant value.

Not by predicting every failure.

But by asking:

“What are we not seeing yet?”

From Compliance to Courage

The evolution of the Independent Director can therefore be understood as a progression:

Compliance

Have we met the requirement?

↓

Oversight

Are we monitoring what matters?

↓

Challenge

Have we tested the assumptions?

↓

Foresight

What could change the risk profile?

↓

Courage

Are we prepared to act when the evidence becomes uncomfortable?

That last step is often the hardest.

Because governance is ultimately exercised by people.

People operate within relationships.

They develop familiarity.

They build trust.

They form views.

They become invested in previous decisions.

They sometimes become uncomfortable challenging individuals they respect.

Independence therefore requires continuous self-awareness.

The Five Behaviours Behind Real Independence

In my view, five qualities sit at the heart of effective independent judgment:

Curiosity

Because directors cannot challenge what they do not understand.

Courage

Because some questions are uncomfortable.

Evidence discipline

Because intuition is not a substitute for facts.

Constructive challenge

Because governance is not about confrontation.

Integrity

Because independence ultimately rests on judgment.

These characteristics are not captured fully by a statutory definition.

They are demonstrated through behaviour.

The Boardroom Test

Perhaps every Independent Director should periodically ask themselves five questions:

1. What have I challenged recently?

If the answer is “very little”, is that because the organisation is exceptionally well governed — or because I am not challenging enough?

2. What evidence changed my view?

If the answer is “nothing”, have I stopped testing my own assumptions?

3. What important question have I not yet asked?

The unanswered question can sometimes matter more than the question already on the agenda.

4. Where could the Board be relying too heavily on management's narrative?

Information asymmetry is inevitable.

The question is whether the Board actively manages it.

5. If I disagreed with the majority, would I be prepared to say so — and explain why?

This may be the simplest test of all.

These questions are uncomfortable by design.

Good governance often is.

Independence Is Ultimately a Behavioural Discipline

The legal framework is essential.

The Board structure is essential.

The committees are essential.

The disclosures are essential.

But governance does not become effective merely because governance mechanisms exist.

It becomes effective when directors use those mechanisms with:

judgment, curiosity, integrity and courage.

That is why I believe the most useful way to think about independence is not simply:

“Does this person meet the statutory criteria?”

That is necessary.

The more meaningful question is:

“Can this person exercise objective judgment even when doing so is difficult?”

The title is important.

The behaviour is decisive.

My Perspective

As I continue to build my perspective on Board governance and Independent Directorship, one principle has become increasingly clear to me:

The Board's value is not measured by how many decisions it approves.

It is measured by the quality of thinking that happens before those decisions are made.

A strong Board does not eliminate disagreement.

It creates the conditions in which disagreement can improve decision-making.

A strong Independent Director does not make management uncomfortable for the sake of it.

They make the organisation:

Better informed,

Better challenged,

and Better prepared.

And perhaps that is the real transition:

From Compliance to Courage.

Because when the stakes are high, governance needs more than people who are technically independent.

It needs people who are willing and able to exercise independent judgment when it matters most.

About the Author

Sharmilaa Thakur is a Senior Global HR & People Transformation Leader with 25+ years of experience across HR Strategy, Leadership, Organisational Transformation, Global Workforce Strategy, People & Culture, Technology and Change Management.

Her professional perspective increasingly spans Corporate Governance, Board Effectiveness, ESG Oversight, AI Governance and the evolving role of Independent Directors.

She writes on the intersection of People, Business, Technology, Transformation and Governance — with a focus on the questions that leaders and Boards need to ask before the answers become obvious.

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