Lessons from Brightcom and the Global Governance Playbook
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Independent Directors must reimagine their roles with conscience to commit to shareholders to firewall corporate malaise.
By P SESH KUMAR
New Delhi, October 15, 2025 — The final order of SEBI in the Brightcom Group (October, 2025) case unspools a riveting cautionary tale where inflated profits and misrepresented financial statements collide with lapses in audit committee diligence and compromised independence criteria. Parallelly almost, the plea of statutory auditors against the punitive action taken by National Financial Reporting Authority (NFRA) for lapses or misconduct related to years prior to constitution of NFRA—would appear to be still under the consideration of the Supreme Court.
The failed oversight, shareholder cost, and the legal imbroglio that embroils independent directors are worth weighing. Placing these events against a backdrop of international best practices, it’s pertinent to examine why Indian corporate governance mechanisms found themselves wanting, and what must change to prevent future headlines of deceit and dereliction. It is also worthwhile to look at the comparative lessons from the US, UK, and the EU, where board accountability and transparency have evolved through fire and failure.
The Brightcom Group saga opens with the classic overture: complaints that herald the whiff of accounting irregularities. SEBI’s probe that follows is not the humdrum bureaucratic affair but an intricate process involving forensic audits, interviews, and a parade of show cause notices.
It is here, within the forensic crosshairs, that the anatomy of failure becomes plain: profits overstated through wrongful accounting, impairment losses kicked down the fiscal road, and research costs masquerading as assets-all classic red flags, shimmering in plain sight, yet evading audit committee scrutiny.
The protagonists—two independent directors, one the audit committee chairman-find themselves in the dock. Their protest: they were not involved in day-to-day operations and relied on experts, happy to take comfort in auditors’ opinions.
Yet SEBI, and the Supreme Court’s ghost in P. A. Tendulkar (1973), have a yardstick sharper than mere innocence-a director is expected to notice what any sensible person would, to question and probe, and not to gaze passively at the parade of numbers marching by. Their failure is not in commission but omission: the missed meetings, the shrugged-off concerns, the unchecked figures, and the easy acceptance of management’s explanations.
The repercussions are not merely academic. Headline profits artificially balloon by over ₹1280 crore; promoters offload shares at overvalued prices, deepening the investor wound. Director independence itself turns out to be a mirage-a declaration signed when disqualification was only a corporate sheet away, thanks to a relative’s subtle employment ties.
If we place this narrative against the global canvas, the hues intensify. In the US, the SEC and Department of Justice swing the sword of enforcement, holding directors personally and collectively to account if reasonable care, skill, and diligence are found wanting. Board members must understand and interrogate the financial accounts, not just rubber-stamp them.
The UK’s Carillion and Tesco debacles, and Germany’s Wirecard meltdown, reveal how a failure in board engagement or audit committee vigilance invites systemic collapse-losses that ripple beyond shareholders to markets and public trust. European standards, post-ARD, strictly enforce audit committee structure, independence, and mandatory oversight.
The G20/OECD principles exhort boards to ensure transparency, shed sunlight on related-party transactions, and champion market integrity.
In each jurisdiction, the lesson is unmistakable: the audit committee is expected to be both a guardian and a bloodhound, independent directors must be able to sniff out trouble and demand answers, or risk liability for not acting, even in the absence of direct fraud.
Reliance on technical experts may soften the blow but never absolves the director who signs off on a tainted balance sheet. Ignorance is no defence, and absence from meetings-virtual or physical-will not shield from culpability when financial misstatement is involved.
SEBI’s penalties, calibrated for proportionality, are more than a slap on the wrist-they are a signal flare for governance reform. The expectation now is active oversight, documented inquiry, and participation that leaves a trail of genuine engagement.
Passive acquiescence is a boarded-up exit, barred by law and ethical expectation.
Reimagining of the audit committee ethos
The Brightcom case demands more than procedural fixes; it calls for a collective reimagining of the audit committee ethos. Indian boards must absorb global best practices—mandatory training for directors in forensic accounting and investigative questioning, annual board performance evaluation, regular engagement with external auditors, and written records of dissent or inquiry.
Regulatory bodies must ensure not just ‘comply or explain’ but ‘comply and evidence’. Audit committee minutes should reflect probing, even combative, discussions-no more perfunctory attendance or silent acquiescence. Independence declarations need to be actively monitored, validated against real employment histories, and periodically reviewed to ensure untainted governance.
Directors, especially independent ones, must internalize their fiduciary duties to shareholders, markets, and society. It must not merely be as a legal burden but as a shield against corporate malaise. The drive for reforms must aim for not just transparency but a culture of constructive skepticism, where no declaration is signed without genuine inquiry, and no audit committee meeting concludes without substantive debate.
Until then, every missed meeting, every unchecked number, risks becoming tomorrow’s scandal-unless boards heed these hard-won lessons from Brightcom and from the world’s playbook of governance gone awry.
(This is an opinion piece, and views expressed are those of the author only)
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