India’s top 100 listed companies have made good progress on corporate governance standards, but there are still areas that need attention. Diversity at the top has been seen to improve, while companies’ response to sexual harassment has been found to be low, and funding under corporate social responsibility (CSR) is not being fully utilised, according to Excellence Enablers published last week Survey on Corporate Governance suggests. It is an initiative of M. Damodaran, former chairman of the Securities and Exchange Board of India. The study relies on annual reports and website disclosures of Nifty 100 companies. Here are some key findings.
advantage in diversity
Company boards appear to have taken some steps to improve gender diversity in top positions. Five companies had no women independent directors (IDs) at the end of FY22, the lowest since the rule mandating the presence of at least one in 2019. The number of firms with two or more female IDs increased from just 20 to 36. three years ago. Meanwhile, more than 85% of independent directors fall within the age group of 50-75 years, indicating a dire need to infuse young blood.
posh awareness
Nearly a third of the Nifty 100 companies reported receiving no complaints in FY22 under the Prevention of Sexual Harassment at Workplace Act. The numbers were 29, 30, 37 and 31 respectively in the four financial years from FY19 to FY22. Absence of any complaints in companies with such a large workforce may in some cases point to lack of awareness among employees about such redressal platform or lack of trust in reporting such cases.
CSR promise fulfilled?
The number of Nifty 100 companies that did not spend the full mandatory Corporate Social Responsibility (CSR) funds was the highest in at least five years in FY22. Around 29% of companies had unspent funds, up from 15% in the previous two financial years. Companies are required to spend at least 2% of their net profit over a period of three years on CSR projects. Reasons for failure to utilize the funds ranged from difficulty in finding a suitable project to covid-related issues.
board meeting
In both FY18 and FY19, 51 companies out of the Nifty 100 had less than seven board meetings. However, a change in the trend was visible from FY20 onwards, when 44 companies had four to six meetings in FY21 and FY22. (A listed company is required to hold at least four board meetings in a year.) The number of companies holding more than 10 board meetings has also become highest in these two financial years – FY2021 and FY2020. 26 and 25 companies respectively in year 22.
anticipation of risks
Companies saw a sharp rise in almost all exposures in FY22. 99 out of 100 companies flagged financial risks, compared to 82 in FY2011. A similar trend was observed for operational risks – risks related to business, customers, supply chain, vendors and outsourcing, with 89 companies citing this as a key risk to profitability in FY22 as compared to 77 in FY21 Identified. In addition to these, other risks related to IT, regulatory changes and ESG were identified.
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