Independent directors still remain jobless

A joint study done by Hunt Partners, AZB Partners and PwC reveals that 65 per cent of companies don’t have independent directors driving the board meeting agenda, which is undermining their participation and contribution in these meetings.

“The regulatory framework has more teeth and better clarity, the advent of the new Companies Act 2013 calls for Indian corporate governance standards to be at par with the best worldwide. The subject matter of board effectiveness is now front and centre for all well managed companies. Seen in this context, the report does indicate that corporate governance in India has still some distance to cover,” said Sunit Mehra, managing partner, Hunt Partners.

The study revealed that corporate executives and retired bureaucrats have highest presence on boards currently. Interestingly, over 50 per cent of the surveyed independent directors were in favour of hiring younger and additionally qualified board members.

For board meetings to be effective, it is equally important that board members are adequately aware of the current topics of discussion before the board. However, the study pointed out that 60 per cent of the independent directors found the need to source third party information regarding the competitive environment of the company in order to discuss identified issues at meetings.

Further, the survey clearly indicates that maintaining transparency will remain a key responsibility for Indian corporates. From disclosing related party transactions to formal board evaluation procedures, most Indian boards are yet to get the requisite processes entirely right. This is expected to improve in the near future with the mandates of the Companies Act, 2013, being implemented more rigorously.

According to it, 12 per cent of the Indian companies have directors related to the promoter and 25 per cent of the companies surveyed have directors directly or indirectly related to the CEO or chairperson of the company.