19% directors in top 100 companies attend fewer than 75% board meetings, says report
NEW DELHI: It has reported that, it’s great to have big names on your board of directors. But what use would that be to the company if they do not attend board meetings and contribute? A significant number of top companies in India seem to be facing this problem.
About one in every five directors (both executive and independent) or 19 per cent of the directors in top Indian companies attend fewer than 75 per cent of board meetings, a recent analysis by proxy advisory firm Ingovern Research Services has found. Ingovern analysed the annual reports of companies and found some of the directors did not attend any meeting at all in FY12. InGovern is independent proxy advisory firm in India.
Maruti Suzuki, Ashok Leyland, Cummins India, Exide Industries, Shriram Transport and United Phosphorus are some of the companies that had more than half of their directors attending less than 75 per cent of the board meetings, according to the analysis.
“A director is required to spend about two-three hours every three months. With the ministry allowing participation through video or a telephone call, the person need not even travel. If one cannot make even this minimal effort, what is the point of appointing him a director?” asked Shriram Subramanian, founder and MD, Ingovern.
As a corporate governance best practice, Ingovern recommends shareholders vote against the re-appointment of directors who attend less than 75 per cent board, AGM or committee meetings or have not discharged their directorial duties.
One of the reasons for poor attendance is the number of directorships. Some independent directors have bitten more than they can chew.
As a corporate governance best practice, it is recommended that independent directors do not hold outside directorships in more than 10 public companies. However, Ingovern found that nine per cent of the independent directors have outside directorships in more than 10 public companies. Six of the top 100 companies have close to half of their independent directors holding more than 10 outside directorships, the report adds.
Subramanian says, “Corporate India has a long way to go before adhering to corporate governance best practices. The data stand out, with even top companies not treating these practices in the right spirit. Institutional investors and regulators should demand better practices from promoters and managements.”
The report added the number of board meetings held by companies in the top 100 companies was, on average, seven a year. Clause 49 of the Listing Agreement mandates listed companies have at least four board meetings in a year, with a maximum gap of four months between two meetings. Fifty nine companies held between four and seven meetings and the remaining 41 had more than seven.
(Business Standard, 7 Nov 2012)