Thirty-six Maharatna and Navratna companies fell short of the mandated minimum number of independent directors in 2024-25, according to the fifth edition of Excellence Enablers’ survey. The survey explores corporate governance practices across 14 Maharatna and 26 Navratna companies.
While corporate governance practices have seen improvement over the years, there are still areas that need attention, indicating ongoing gaps in compliance with governance norms.
The Companies Act requires every listed company to appoint independent directors constituting at least one-third of its board. The report shows that the highest number of independent directors on a single board in the last four years (FY22-FY25) was eight in FY22, a level seen in three listed companies. The number is down to five, seen in a single company.
Gender diversity on boards also remained skewed. Thirty PSUs reported having no women independent directors on their boards in FY25. The figure is the highest in the last four fiscal years and up from seven in FY22. Corporate governance regulations mandate that public companies have at least one independent woman director on their boards.
The skew is visible even among women executive directors (ED), the ones who are involved in the day-to-day functioning of a company. Seventeen companies had no women ED on their boards. The figure stood at three in FY22.
The report noted that while the presence of a woman on independent director boards is mandated, there was no similar provision to facilitate women executives graduating to board positions. “This can happen only if a sufficient number of women are provided appropriate career progression in the organization,” the report said.
Moreover, an age-wise analysis of independent directors across PSUs indicates a marked greying of boardrooms. The number of independent directors under 50 years has fallen to just five in FY25 from 40 in FY22 and around 30 in FY23 and FY24. This shift is important, given that most independent PSU board members fall in the 50-65 age bracket.
Board effectiveness is closely tied to directors' tenure. The average time served by executive directors, including chairman and managing directors, has fallen from 2.3 years in FY22 and 2.14 years in FY24 to 2.08 years in FY25. For independent directors, average tenure has fluctuated, with the figure at 1.09 years in FY25, the report said. Independent directors are restricted by law to a maximum of two five-year terms.
The report also touches upon the status of succession planning across PSUs. Twenty-one companies between FY22 and FY25 disclosed no details pertaining to succession planning in their annual reports. Among the companies that did disclose, most only gave a broad reference rather than a detailed category of the planning in order. “In the absence of a robust succession planning process, the sudden departure of a board member or key/senior management personnel could be disruptive," it said.