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The 21-member Uday Kotak Committee on corporate governance, which will submit its report to markets regulator SEBI on Friday, is set to recommend a number of changes for companies with regard to listing obligations and disclosure requirements (LODR).
The proposed changes will include making it mandatory for companies to hold at least five meetings a year (from four at present), extending the minimum number of directors from three to six, and increasing the number of independent directors from 33 per cent to 50 per cent of a company’s board.
The reason for asking companies to hold five board meetings is to ensure that at least one is held to discuss corporate governance issues and not quarterly financial results.
Multiple sources confirmed that the recommendations may also usher in ‘gender diversity’, by mandating the appointment of at least one woman as an independent director. Current laws require companies to appoint a woman to the board. Strict eligibility criteria for independent directors will be prescribed to ensure that the company promoter does not name a kin to the board.
A minimum level of attendance at meetings is likely to be prescribed for each board member. Currently, many board members are known to skip all four board meetings during the year.
Among other things, the committee not only intends to give more voice to independent directors, but also put the onus on them in case of any lapse in corporate governance.
It has been recommended that companies exclusively discuss strategy, succession planning, budgets, risk management, ESG (environment sustainability and governance) and board evaluation in a meeting every year.
Changes have been specified to the ‘matrix reporting structure’ of a company board to diversify power and responsibility.
Recommendations have been made to cut conflict of interest for public interest directors on the board of stock exchanges.
Changes with regard to independent directors for top 500 companies based on their market-cap have been recommended from April 2019. For the remaining, they can be implemented from April 2020.
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