How good are company boards

While the Satyam scandal led to a debate on the quality of corporate governance in large Indian companies, relatively less is known on how effective are boards of mid-size companies. A recent Grant Thornton-FICCI study on 500 such companies makes some revelations on the adequacy and quality of corporate governance.

Some of the key findings of the study suggest that a shake-up is needed to improve corporate governance in India. For instance, a majority of the respondents (72 per cent) said that they held their audit committee meetings only 4 or 5 times a year. Only 28 per cent firms said their audit committees met 6-7 times a year.

A grudge against some existing rules is also evident among those polled. As many as 56 per cent respondents, for instance, felt an ideal audit committee should consist of 25-to 50 per cent independent directors and that the compliance norms with respect to Clause 49 should differ based on company size. “This is a strong signal to lawmakers that a onesize-fits-all approach may not lead to good levels of governance,” says Monish Chatrath, National Markets Leader, Grant Thornton India. Currently, 66 per cent of those polled said their entire audit committee was made up of independent directors.

Stating that some efforts are being made to improve corporate governance, the study shows that more than half (57 per cent) of the respondents stated that their companies were taking steps to impart training about the risk profile and the business model of their companies to its audit committee members. Most companies, however, are not serious enough about having a risk officer on board. As many as 41 per cent of the participating companies admitted that they had no Chief Risk Officer and 40 per cent firms did not even have a whistleblower policy. Even the board of directors, the survey notes, get little preparation time ahead of major meetings. Says Chatrath: “There is very little scope for discussions on matters which may not be part of the original agenda.”

 

Q&A ‘India’s growth story needs to be shared’ On a visit to India, CEO OF Harvard Business Publishing (HBP), David Wan flagged off the Indian operations of HBP and met Indian CEO’s. He spoke to Anusha Subramanian about HBP India’s plans. Excerpts: What made HBP come to India? India is the first country outside of the US where HBP is setting up an office. We hope to establish and enhance the company’s partnerships in the region by identifying and publishing the best local content. Why did you launch now? India is symbolic of the entire region where there is exciting growth and a movement towards globalisation. Also global businesses can learn several lessons from India where businesses have grown rapidly. What’s your strategy going to be? HBP’s mission is to improve the practice of management in a changing world. We want to adapt and tailor the content here to the needs of professors and management professionals. We will also acquire ideas and best practices from Indian businesses and academic institutions that will interest audiences outside India.

 

— Manu Kaushik