In private conversations, and, occasionally, during Q&A sessions, one is often asked “How good are corporate governance standards in India?”. There are also those (the Sun rises in the west category) who believe that the western world practices higher standards of corporate governance. Dealing with this second question is simple. Tucked away in my mind are the names of many celebrated governance failures in the corporate world in the USA and in Europe, and the minute those names are rolled out with unconcealed glee, the conversation comes to an end. The first question merits a detailed response, and for this, it is best to turn to, unarguably, the most comprehensive corporate governance survey that is annually brought out by Excellence Enablers. The Sixth Edition of Survey on Corporate Governance by Excellence Enablers is just out.

It is by now abundantly clear that a properly constituted Board of Directors is the best starting point to ensure good corporate governance. The 6^th Annual Survey on Corporate Governance addresses several aspects of Board composition. In the years FY 22, FY24 and FY 25, there were instances of companies that did not have the minimum number of Board members. If non-compliance starts with Board composition, one cannot expect very much by way of good practices in such companies.

In addition to the arithmetic of Board composition, it is useful to look at diversity on Boards, since it is diversity that expands the areas of exposure and expertise on the Board. Both the Companies Act, 2013 (the Act) and the SEBI LODR Regulations, 2015 (LODR) mandate gender diversity. The Survey brings out that 8 of the top 100 listed entities did not have a Woman Independent Director. What is worse is that this number, which was 3 as on March 31, 2022, has increased to 8 over a period of 3 years. Another element of diversity, namely age diversity, is extremely important, even though it has not been mandated. With increasing focus on AI, and related areas, as well as the pace and nature of change in the economy, and in the corporate world, a case for younger Directors is not required to be made out. As on March 31, 2025, there were 26 Independent Directors (IDs) below the age of 50, and 454 IDs between the ages of 50-75. 12 persons above the age of 76 continued to be on the Board.

As important as the composition of the Board, is the number of meetings of the Board and the committees. For what use is a Board or a committee if it does not meet often enough? 8 of the top 100 listed companies had only 4 Board meetings in FY 25. The corresponding figure was 4 in the previous year. Since the focus of the quarterly Board meetings is financial results, and related matters, it is inconceivable that Boards that meet only 4 times in a year, are able to devote quality time to matters such as strategy, succession planning, and the like. While companies should address this serious deficiency, it might be useful for the Regulators and the law makers to increase the minimum number of meetings from 4 to 6.

The related aspect is the attendance of Directors in Board meetings. In FY 25, there was 100% attendance by Directors in only 12 companies. The corresponding figure in FY 22 was 19. This gives rise to the question whether persons that cannot attend all Board meetings should continue to be on the Board. This question assumes significance in the context of the fact that in FY 25 8 Directors had 0 attendance. These unacceptable numbers are in spite of virtual/ hybrid meetings.

We turn next to the number of meetings of the Audit Committee (AC). As in the case of the Board, as many as 13 ACs had only 4 meetings during FY 25. Interestingly, the figures for FY 22 and FY 23 were also 13, with FY 24 witnessing a drop in the number to 10. Clearly, the trend is unhealthy. The remit of the AC is very large, and it is very clear that an AC meeting only 4 times in a year cannot do justice to several matters which are best addressed in the non-quarterly meetings. Here again, it might be worthwhile for a minimum of 6 meetings in a year to be mandated.

The situation is not any better when it comes to the Nomination and Remuneration Committee (NRC). In FY 25, 9 NRCs met only once during the year, and that too presumably to meet the requirements of law and regulations. Here, the problem seems to be with the prescription that the NRC must meet at least once a year. Given the number of important issues that an NRC is required to attend, it would seem that 4 meetings in a year would be the minimum required to do justice to the remit of the NRC.

Risk management is a matter that has existential implications for the corporates. Surprisingly, the Act does not mandate the setting up of the Risk Management Committee (RMC). This is a gap that SEBI has sought to address by mandating that the Board should appoint an RMC. It is useful to notice the difference between Board committees and Board appointed committees, since the latter can also have, as their members, persons who are not on the Board of Directors. In FY 25, 1 company had only 1 meeting during the year, and 31 companies had the prescribed minimum number of 2 meetings. Considering that risks that a corporate faces have increased in number and complexity, with the impact being of considerable significance, an RMC cannot do justice to its tasks if it meets less than 4 times in a year. 2 meetings per year do not even scratch the surface. The attendance of RMC members is a matter deserving attention. In FY 25, 9 members had nil attendance. Less than 90% of the members had 100% attendance. The identification and mitigation of risks does not seem to rank as one of the major areas warranting attention in some companies.

It is by now well recognised that given the limitations of time, a Board cannot do a deep dive into a number of matters that are within its remit. As of necessity, committees are expected to look into all relevant details in regard to matters that they have to address. In this context, the distribution of committee membership among IDs assumes considerable importance. An ID, who is on all committees, is expected to be overworked if he/she takes the work seriously. As against this, an ID, who is on no committee, will suffer from significant information asymmetry. In FY 25, 37 IDs were on no committee, and 24 IDs were on all 5 committees, the 4 mandated by law and the RMC. Information asymmetry is therefore not only between the executive members of the Board and the IDs, but also inter se among the IDs.

Annual General Meetings (AGMs) also need to be taken more seriously than they are at present. With virtual meetings having been enabled, AGMs have seemingly lost some of their relevance. One area of concern is the time taken between the finalisation of accounts, and the date of the AGM. In FY 25, 82 non-PSUs, held the AGM more than 45 days after the finalisation of accounts. PSUs faired considerably better, with only 4 companies having taken more than 45 days after finalisation of accounts, presumably because in their case, the time taken is reckoned from the completion of CAG audit, to hold their AGMs. In FY 25, 2 companies took 133 days to hold their AGMs. Shareholders experience considerable frustration since they have to wait for the AGMs to approve the declaration of dividends. This is an area where companies need to get their act together.

It is generally believed that no matter how busy a person is he/she should find time to attend the AGM, if he/she is Chairing the Board. The Survey indicates that in AGMs held in FY 24, one Board chair did not find it convenient to attend the AGM. Similarly, quite a few committee chairs also decided to stay away from the AGMs. The AGM being the annual interaction between the shareholders and the Board, there should be absolutely no excuse for any person chairing a Board or a committee to stay away from the AGMs. Part of the problem lies in the fact that only the Chairs of the AC and the Stakeholders Relationship Committee (SRC) are mandated to attend the AGM (even those witnessed a few instances of absence). It is necessary for SEBI to prescribe that Chairs of the Board and all the committees, without exception, should be present during the AGMs, to hear firsthand from the shareholders, their suggestions and concerns.

The institution of IDs has been conceived as a major instrument to ensure corporate governance. Schedule IV of the Act provides that the IDs should hold at least one meeting in a FY without the attendance of non-IDs and members of management. Many companies seem to be interpreting the words ‘at least’ as the appropriate number of meetings to be conducted. In FY 25, 61 companies had only 1 meeting of IDs during the year, and 2 companies had no meeting during the year. LODR, by way of a discretionary requirement, has pointed to the need for at least 2 such meetings in a year. Both the number of meetings, and the seriousness with which such meetings are conducted, require to be given more attention.

Every year, a few IDs resign from the Board for one or more reasons. To ensure an element of honesty in the reasons cited for resignation, SEBI has mandated that the exiting Director should state that in addition to the reason mentioned for resignation, there is no other reason. The Survey throws up a number of interesting conclusions. In FY 25, 64 IDs resigned citing “pre-occupation with other assignments”. One wonders whether they were not aware of their existing workload when accepting Board positions. Inspite of “personal reasons” being discouraged as being non-specific, 9 IDs who left in FY 25, have indicated “personal reasons” as the basis for their resignation. There were also 9 cases where the resignation was on account of “conflict of interest”. It would be useful to examine whether these conflicts existed from the dates the IDs were on the Board, or whether they were conflicts subsequent to the appointment as IDs. The position is not much different when it comes to KMPs because 2 of them have cited “personal reasons” as the grounds for their exit.

Board evaluation is a matter that has been grudgingly accepted by many Boards. Therefore, they go through this exercise in a mechanical manner, denying the Board and the company the benefit of an evaluation carried out with sufficient seriousness and rigour. What is significant is that 69 companies in FY 25 went in for what has been described as in-house evaluation, implying that this is a process that had to be gone through, and has been gone through. 19 companies have got the process of Board evaluation conducted by external firms. Some PSUs have claimed that they are exempt from the process of Board evaluation. If this is to be a meaningful exercise, it should be mandated that every alternate year, the process of Board evaluation should be entrusted to an external agency, with sufficient firsthand boardroom experience.

There are some discretionary requirements which have been prescribed by SEBI. The Survey, after taking note of these discretionary requirements, has recommended that 2 of them, namely, the separation of posts of Chairperson and MD/ CEO, as well as the reporting of the Internal Auditor directly to the AC, should be made mandatory.

Board members are expected to be inducted for committing quality time and for contributing to the decision-making process in boardrooms. It stands to reason that there should be appropriately compensated. In FY 25, 2 companies did not pay any sitting fees, and 23 of them paid sitting fees between INR 21,000 to INR 50,000. The maximum permitted by law is INR 1 lakh per meeting, and it would be necessary for Boards to seriously consider whether the persons who are contributing productively should get paid the maximum of INR 1 lakh. Many companies pay less for attendance at committee meetings, than at Board meetings. Considering the importance and the workload of the AC and the RMC, it would make sense if the sitting fees for both these committees are at the same level, as for the Board meetings (if that is not the case).

The payment of profit linked commission to Directors is premised on a number of factors, with participation/ attendance/ contribution at meetings being the most significant of them. Considering that participation and attendance can be adequately addressed through payment of sitting fees, it is necessary that profit linked commission should be on the basis of contribution by Board members as established by a robust Board evaluation process. This is not the easiest of exercises, and will meet with considerable resistance. Nevertheless, not resorting to an evaluation-based determination of commission would amount to not placing a premium on performance. While on the subject, the statutory limit for the amount of profit linked commission to be paid to Non-Executive Directors (NEDs) is 1% of the net profits of the company. However, as pointed out in the Survey, what is paid is woefully short of 1% of net profits. With stock options no longer available to IDs, it is imperative for companies to revisit the amount of profit linked commission, so that Directors of acceptable quality are enthused to join Boards, and to stay on.

The Survey is a mirror that enables companies to see how they are performing. An intelligent person looking at the mirror will clean his/her face, to fix blemishes. The less intelligent will clean the mirror. It is for corporates to decide where they choose to belong.

To view our Sixth Edition of Survey on Corporate Governance, please click here.