'The real test of governance': What SEBI's Tuhin Kanta Pandey says on role of directors

SEBI  Chairman Tuhin Kanta Pandey on Friday said the real test of governance is not during steady growth, but when something goes wrong. Speaking at 2025 Annual Directors’ Conclave in New Delhi, Pandey said India has made remarkable progress in governance, which is no longer just about policies but about tone, behaviour and values in action. He said the foundation is strong, but a foundation is not a fortress, he added.

Pandey highlighted that SEBI has progressively deepened the framework for corporate governance over the past two decades. This includes the revision in the Companies Act, 2013, and the codification of listing obligations under the SEBI LODR1 Regulations. 

With this, he said SEBI has laid down detailed requirements regarding the composition, independence, and responsibilities of boards and their committees, including audit, nomination and remuneration, and risk management committees.

Beyond structural mandates, Pandey said this framework also conveys core principles that capture the spirit of effective board conduct. It calls upon directors to act with integrity and purpose, to question and engage with management without bias or hesitation, and to offer thoughtful scrutiny of strategy and risk, he noted.

"Boards are encouraged to think independently, apply sound judgement, and uphold the broader interests of stakeholders through transparent and principled decision-making. The foundation is strong — thanks to the robust regulatory evolution, improved transparency, and the formalisation of board structures.

Foundation not a fortress
Pandey said the company boards often devote significant time to reviewing detailed compliance packs, while important signals about organisational culture are barely discussed.

"Independent directors sit at the table — but are they being heard, or simply counted? We have diversity on paper — but do we have diversity of thought? And most importantly: Are we treating governance as a breathing value? Or just a checklist? Because too often, form overshadows intent. And this gap - between structure and spirit - is becoming harder to ignore," Pandey said. 

Pandey said when a whistle-blower email lands; when a social media campaign questions ethics; when performance dips, and pressure rises; this is when governance model speaks the loudest.

On Independet directors, Pandey said: "We cannot continue to view them as honorary appointees, or friendly critics. They must be viewed - and treated - as stewards of accountability."