Comments
At a time when the board of corporates are coming under scrutiny for upholding governance issues, the size of the board is shrinking.
In FY’18 and FY’19, the minimum and maximum Board members were 4 and 22.
However, the maximum Board size has shrunk to 16 in FY23, according to a new report by Excellence Enablers which is backed by former SEBI Chairman M Damodaran.
With mandatory five Board committees, there ought to be enough members to ensure that committees are properly constituted, and do not have the same members on almost all committees.
- Also read: Reliance-linked Qwik Supply third-largest electoral bond buyer; Reliance denies subsidiary status
Good corporate governance is no more than doing the right things, at the right time, in the right manner, and for the right reasons, without having the lawmakers or the Regulators laying down what requires to be done. Good governance practices by a handful of entities, who strike out on their own in the interest of stakeholders, have often resulted in laws and regulations on the same lines for other entities in a similar universe, said the report.
As per Section 149(1) of the Companies Act, 2013, every company has to have a Board of Directors with minimum three directors in the case of a public company, two in the case of a private company and one director in the case of a one person company.
On the maximum, the board can have fifteen directors.
The Companies Act prescribes that every listed public company will have at least one-third of the total number of directors as independent directors except for PSUs.
As per SEBI, if the chairperson of the Board of Directors is a non-executive director, at least one-third of the Board of Directors will comprise of independent directors and where the listed entity does not have a regular non-executive chairperson, at least half of the Board of Directors will be independent directors.
As of March-end, 2023, six companies were found non-compliant of the independent directors norms.
“It has been noticed that every effective Board has an appropriate mix of executive directors and non-executive directors. Without the optimum mix, the Board will not get the benefit of the insight of persons who have executive responsibilities and experience, said the report.
The report also flagged concerns around combining the roles of Chairman and MD and CEO as it runs counter to the basic principle of Corporate Governance.
If both the Chairperson and the MD have executive responsibilities, the requirement of Corporate Governance does not get adequately addressed. It is unfortunate that this separation has been made non-mandatory, said the report.
Appointment of Lead independent director should be made mandatory for Boards which have an Executive Chairperson, it added.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.