With less than a month left to comply with one of the key recommendations made by the Kotak Committee on corporate governance, more than 20% of the top 500 listed companies by market capitalisation are still to appoint an independent woman director on their boards. In total, 101 companies are non-compliant on this parameter as on date. The new regulation comes into effect from April 1.
Some of the companies yet to appoint an independent woman director include heavyweights such as Indian Oil Corporation, Bharti Airtel, Interglobe Aviation, General Insurance Corporation, Siemens, Procter & Gamble Hygiene and Healthcare, Bank of India, DLF, Godrej Industries, Jindal Steel and Power, and Pfizer, among others, according to PRIME Database data as on March 6, 2019.
According to analysts, these companies will have to appoint at least one independent woman director on their boards by April 1, when the Kotak Committee’s recommendations come into effect or else they will be violating the listing agreement with the Securities and Exchange Board of India.
“This is a requirement that the companies have to fulfil by April 1, 2019 to comply with their listing agreement with Sebi,” Sai Venkateshwaran, partner and head-accounting advisory services, KPMG in India, told FE. “Global studies have shown that having woman directors improves the quality of discussion and a broader range of issues get addressed,” he added.
According to one of the key recommendations of the Kotak Committee which was accepted by Sebi, there must be one independent director on the board of directors of the top 500 listed companies by market capitalisation by April 1, 2019 and of the top 1,000 listed companies by April 1, 2020.
Currently, every listed company is required to have only one woman director on its board of directors, irrespective of the nature of directorship. This started with the Companies Act, 2013 which mandated a certain class of companies to have at least one woman director on board. Accordingly, Sebi in compliance with the Companies Act, 2013, made it compulsory to have at least one woman on a board from October, 2014.
Companies, however, fulfiled this requirement from largely appointing a non-independent director on their boards from the promoter family.
Later in June 2017 as part of its mandate Sebi appointed a committee under Uday Kotak, MD & CEO of Kotak Mahindra Bank, to suggest measures to improve corporate governance measures. The committee submitted its recommendations in October 2017, which were finally accepted by Sebi in March 2018. In May 2018, Sebi amended its listing regulations to incorporate some of these measures.
“The reason for having an independent woman director came in because often companies appointed a relative rather than getting a meaningful voice on the board,” Sandip Khetan, Partner and National leader, financial accounting advisory services, EY India, said.