Key Details
In an address at the CII Interactive Session on Board Members and Independent Directors in Bengaluru on 31 August 2026, SEBI Whole-Time Member K.V.R. Murty outlined how listed-company boards should approach judgement, information, conflicts and emerging risks.
Independent judgement: Formal eligibility does not establish meaningful independence. Directors must be willing to challenge assumptions, seek additional information and resist inappropriate influence.
Decision process: Major proposals should present alternatives, downside scenarios, financial consequences, conflicts and the option of taking no action, rather than making a polished case for one preferred outcome.
Collective responsibility: Committees can deepen scrutiny, but the board cannot transfer its ultimate responsibility to the audit, risk or other committees.
Crisis information: Effective disclosure depends on material information moving quickly within the company. Bad news should reach the board before it becomes a disclosure failure.
Related-party transactions: Compliance with approvals and disclosures is necessary, but boards must also examine commercial justification, fairness, alternatives and cumulative patterns across multiple transactions.
AI governance: Boards of listed entities using AI should understand its purpose, data, decision-making role, failure risks, reliance on external providers, points of human intervention and lines of accountability.
Independent Directors Are Expected to Exercise Judgement, Not Merely Dissent
The address distinguishes independence as a legal status from independence as boardroom conduct. An independent director does not fulfil the role merely by disagreeing with promoters or management. The relevant test is whether the director applies informed judgement to the company’s long-term interests.
That may require opposing a proposal, seeking independent advice or supporting management when the evidence is persuasive. A board without disagreement is not necessarily well governed; informed disagreement can improve the eventual decision.
The address also cautions against evaluating governance entirely through commercial outcomes. A decision that later proves unsuccessful is not automatically a governance failure. The more appropriate questions concern what the board knew at the time, whether it tested projections and alternatives, and whether conflicts and material risks were properly examined.
Boards Need Information That Reveals Choices and Risks
Directors cannot oversee risks that never reach them. Board papers should therefore do more than document management’s recommendation: they should reveal the assumptions, rejected alternatives, downside exposure and consequences of inaction.
The governance cycle also continues after approval. Recording questions in meeting minutes is not an outcome. Boards need to follow whether agreed actions were implemented and whether the underlying decision produced the intended result.
In a crisis, slow internal escalation can become a market-disclosure problem. Timely public disclosure consequently depends on internal systems that identify material developments, assign responsibility and move adverse information upwards without delay.
Related-Party Approval Does Not Establish Fairness
Related-party transactions — deals involving promoters, group entities, directors or other connected parties — can be commercially legitimate but carry an inherent conflict-of-interest risk.
The SEBI Listing Obligations and Disclosure Requirements framework provides safeguards through disclosures, audit-committee scrutiny and shareholder oversight. The address stresses that procedural approval answers whether prescribed steps were followed, not necessarily whether pricing, terms and commercial rationale were fair to the listed company and its public shareholders.
Boards should also examine aggregate patterns. A series of individually ordinary transactions may collectively reveal dependence on a related entity, unusual guarantees, concentration of business or sustained transfer of value.
AI Deployment Is Moving onto the Board Agenda
Material use of AI can affect operations, customers, financial performance, cybersecurity, regulatory compliance and investor confidence simultaneously. It is therefore not exclusively an information-technology decision.
The address does not suggest that every board needs an AI engineer. It expects directors to understand enough to ask:
Why is AI being used, and which decisions will it influence?
What data does it rely on, and what happens when its output is wrong?
Where is human review required?
How dependent is the company on an external technology provider?
Who remains accountable for the resulting decision or harm?
AI may accelerate a decision, but responsibility remains with the company and its governing bodies.
Policy Relevance
The address points towards an effectiveness test for India’s existing corporate-governance framework, rather than an immediate case for adding more rules.
Board mechanism | Evidence of effective governance |
|---|---|
Board papers | Alternatives, conflicts and downside scenarios are presented before approval. |
Independent directors | Challenges lead to additional evidence, revised proposals or recorded reasons for proceeding. |
Risk escalation | Material adverse information reaches the board and disclosure function promptly. |
Related-party oversight | Commercial fairness and cumulative exposure are tested, not only procedural compliance. |
AI oversight | Accountability, human intervention and third-party dependence are documented before material deployment. |
Post-decision review | Boards revisit whether approved actions were implemented and produced the expected results. |
For regulators and investors, the challenge is that these qualities are harder to assess than board composition or committee counts. Governance disclosures may need to convey how boards test major decisions and oversee emerging risks without exposing commercially sensitive deliberations or encouraging formulaic reporting.
Relevant Question for Policy Stakeholders: What evidence should listed companies disclose to demonstrate that independent directors have meaningfully tested material AI deployments, related-party transactions and emerging risks—not merely approved them?
Follow the Full Speech Here: Address by K.V.R. Murty, Whole-Time Member, SEBI, at the CII Interactive Session on Board Members and Independent Directors