Around 30% of top 100 firms had better disclosures on board evaluation in FY16: study

More companies have revealed their board evaluation criteria in FY16 than in the year before and more companies evaluated their board members in the last fiscal year, a study by IiAS showed


The scope of the study includes disclosures of 100 listed companies, of which 50 are part of the National Stock Exchange’s Nifty index and the rest are part of the Nifty Midcap 50 index.
The scope of the study includes disclosures of 100 listed companies, of which 50 are part of the National Stock Exchange’s Nifty index and the rest are part of the Nifty Midcap 50 index.

Mumbai: Of the top 100 companies, 30% had better disclosures on board evaluation in fiscal year 2016 from the year before, a study by corporate governance and proxy advisory firm Institutional Investor Advisory Services (IiAS) showed.

The scope of the study includes disclosures of 100 listed companies, of which 50 are part of the National Stock Exchange’s Nifty index and the rest are part of the Nifty Midcap 50 index.

It compares the changes in board evaluation practices, over the previous year, for these 100 companies, providing a sense of how these have evolved.

More companies have revealed their board evaluation criteria in FY16 than in the year before and more companies evaluated their board members in the last fiscal year. Also, more companies have opted for external support for such evaluation than before .

“When we did a similar exercise last year, the disclosure levels were tentative. This year, we saw more confidence in quality of disclosures,” Hetal Dalal, chief operating officer at IiAS, said, pointing to the 30% rise in number of companies who opted for better disclosures.

“One of the things we want to see is more disclosures on outcome, and what is the board agenda going forward. We want companies to come up with an action plan and articulate,” added Dalal.

Only 5% of the companies disclosed the outcomes of their evaluation – namely Hindalco Ltd, Federal Bank Ltd, Reliance Industries Ltd, and Maruti Suzuki India Ltd.

These studies gain importance in the backdrop of the recent spat between Ratan Tata and Cyrus Mistry, the ousted chairman of Tata Sons Ltd, the holding company of the salt-to-software business group.

“One of the lessons from Tata–Mistry spat is establishing a thinking process on what should be the criteria for evaluation. One needs to look at board evaluation in a more constructive manner,” pointed out Dalal

The Tata-Mistry saga has moved to the courtroom from the boardroom, and N. Chandrasekaran has taken charge as Tata Sons chairman.

It has triggered a debate over corporate governance in Indian companies and underlined the importance of better succession planning.

Dalal of IiAS also pointed to the lack of good disclosures on board evaluation in state-owned enterprises.

“A striking observation is that public sector companies do not have good disclosures on board evaluation. For PSUs (public sector undertakings) that are listed, their disclosure levels need be as good, if not better, than other listed companies.”

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