Independent director

An independent director is a member of a board of directors who does not have a substantial or economic link with the business or connected people, with the exception of sitting fees. This member of the board of directors is also frequently referred to as an outside director. According to The Wall Street Journal, independent outsiders make up 66 percent of all boards and 72 percent of the boards of companies that are included in the S&P 500.

The requirements for independent directors on the NYSE and the NASDAQ stock exchanges are quite similar. Both require that "a majority of the board of directors of a listed business be 'independent,'" and both permit pay for directors to be no more than $120,000 per year (as of August 2008).

According to the rules of Nasdaq, an independent director cannot be an officer or employee of the company or any of its subsidiaries. Additionally, this rule applies to any other individual who has a relationship with the company that, in the opinion of the board of directors of the company, could interfere with the exercise of independent judgement when it comes to carrying out the responsibilities of a director.

As of the year 2017, public businesses in India with share capital in excess of one hundred million Indian rupees (Rs 100,000,000) are required to have at least one independent director out of a minimum of three directors. The following is how independent directors are referred to in clause 49 of the listing agreements:

The Companies Act of 2013 specified that at least one-third of the total Directors of all listed public companies must be independent. The majority of the act's provisions became effective on April 1, 2014, and the act as a whole went into effect on that day. Whereas unlisted public corporations are required to have at least two of its directors serve as independent directors, the following types of businesses are exempt from this requirement:

I Public Companies that have a paid up share capital of Ten Crore Rupees or more; or (ii) Public Companies that have a turnover of One Hundred Crore Rupees or more; or (iii) Public Companies that have, in aggregate, outstanding loans, debentures, and deposits that exceed Fifty Crore Rupees or more.

The Companies Act of 2013 was written with careful attention given to the significant insights and contributions to a company that an Independent Director may provide. The qualifications for a candidate that assures the highest standards of integrity and prevents any conflict of interest are specified in Section 149(6) of the Act. These criteria must be met by a candidate. The provisions seek to ensure the autonomy of the appointee to facilitate effective discharge of duties such as upholding shareholders' interest and upholding corporate governance standards, among other responsibilities.  The compensation offered to such Independent Directors in the form of a "sitting fee" has also been increased from Rs. 20,000 (prescribed by Companies Act, 1956) to a maximum of Rs. 1,00,000/- per meeting.