Boards of Nifty 500 companies have grown smaller over time: IiAS report

Shrinkage cuts across MNCs, PSUs, institutionally-controlled firms and widely held ones; Drop in independent directors, largely led by public sector companies, is a key reason

The boards of directors overseeing the Nifty 500 companies have grown smaller in recent years.

There were 4,813 directors totally in 2018, which fell to 4,559 in 2020, according to a May 2021 ‘Indian Boards: Structure And Breadth’ report from the Mumbai-headquartered Institutional Investor Advisory Services. The firm advises investors on governance issues.

The average number of people on the board of a company shows a decline for multinational companies, public sector ones as well as institutionally controlled and widely held companies. The drop in independent directors, largely led by public sector companies, has played a major role. Many are yet to fill up vacancies, noted the report. There are 133 fewer independent directors on public sector firm boards in 2020 compared to 2019, noted the report even as there were 72 such firms in both years. A churn in the composition of the companies which make up the Nifty 500 has also contributed, said the report.

Regulations have pushed towards greater independence of company boards in recent times, noted the report. The board of directors is expected to oversee the company’s working on behalf of its shareholders.

“The expectation is that the presence of an adequate number of independent directors on the board will ensure that the discussion is more broad-based, with multiple perspectives, and that decisions taken are unbiased and interests of all the stakeholders, including minority shareholders have been taken into account,” it said.