How boardrooms have changed in a decade

Last year, amid the pandemic, the rarefied worlds of boardrooms and annual general meetings (AGMs) went virtual. According to a report by CimplyFive, virtual AGMs were only slightly delayed — by 13 days visà-vis normal times. Expectedly, they were shorter by 14 minutes even as the number of shareholders who went for e-voting surged 37% and public shareholder attendance went up six times as against 2019. 81247396 81247405While these shifts happened to AGMs last year, some important changes have been underway for Indian boards over the last decade. According to Hunt Partners’ India Board Report, a biennial publication, the average board size has risen since 2006-07 from 9.7 members to 11.3 in 2018-19, with listed PSUs seeing the sharpest jump — with 15.4 members. Foreign independent directors as a percentage of total members have risen from 2.1% in 2006-07 to 6.4% in 2018-19, even though it still remains low, with at least half the companies surveyed having no foreign directors. 81247417 81247432Interestingly, rapid digitisation in the outside world is also reshaping expectations in the boardroom. “While today, skills like board experience and audit/tax is ranked very high for independent directors, the survey respondents foresee the importance of skills like cyber security, R&D innovation, digital technology and risk rising sharply in future,” says Suresh Raina, partner, Hunt Partners. Women representation on corporate boards has gone up from 4.6% in 2006-07 to 14% in 2019. But this is largely driven by compliance. Even then, Amit Tandon, founder, Institutional Investor Advisory Services, says it’s a progress India must take cognizance of. “This is a very good example of how the country has pushed regulation to shape certain outcomes,” says Tandon. 81247440Prithvi Haldea, founder, Praxis Consulting, who has tracked listed companies and their boards for over three decades, however, is sceptical. “I don’t think anything has changed significantly. There is nothing like an independent director. It’s a myth we are trying to build,” he says. His contention is that since independent directors are chosen and remunerated by promoters, they hardly overlook the promoters to protect the interest of minority shareholders. “There are only two ways to improve corporate governance — either it is in their DNA or create the fear of law in them. I have been advocating strict laws that make operative people like CEOs and CFOs accountable,” says Haldea. 81247443Both Tandon and Shriram Subramanian, MD of advisory firm InGovern, differ. They see some subtle yet significant shifts happening in corporate boardrooms. “Expectations from independent directors have changed. Look at the case of Vedanta buyback. Today there are greater expectations from them,” says Tandon. In October, in a major setback, Vedanta’s bid to delist from the stock exchange failed as it didn’t get enough shares. 81247449In 2018, HDFC faced a blow when two of its directors Bimal Jalan and Bansi Mehta — who were up for reappointment — had to resign after proxy advisory firms asked investors to vote them out. In fact, HDFC chairman Deepak Parekh’s reappointment went through by a whisker after the advisory firms rallied against him sitting on eight boards and spreading himself thin. “People are asking harder questions of independent directors, starting with, ‘What are you doing?’. With initiatives like Sebi-mandated skill matrices of board, the boards are going to be much more self-aware,” says Tandon. The number of independent directors who did not get reappointed in recent years has gone up sharply, says Subramanian, pointing to the shape of things to come. 81247450Methodology: Hunt Partners’ The India Board Report is a biennial publication, written in collaboration with PwC and AZB & Partners. It is based on three sets of board data: (i) from the MCA website, (ii) public domain (for listed companies) and (iii) primary surveys with 250+ respondents such as independent directors and company secretaries. While the data is of FY2018-19, research and surveys were conducted in FY2019-20, followed by data analysis and publication in late 2020.

from Economic Times https://ift.tt/3bHiXTa