Many promoters propping up wives, kin in company boardrooms

Inclusion of women in company board rooms is a good sign, but instances of promoters propping up their wives or kin are also common, according to president of the Institute of Company Secretaries of India Atul Mehta.

Mehta, who was in Goa on Wednesday to conduct a capacity-building workshop for young company secretaries, also said that the Companies Act 2013, which came into force last year, needed constant tinkering and would need at least a year more to "settle down".

When asked if mandatory inclusion of women directors on boards of companies, with a turnover of Rs.300 crore, would also result in nepotism and the inclusion of kin or wives of company promoters in boardrooms, Mehta said: "It is happening."

Mehta also told IANS that if one takes a sample of companies, there would be many with wives of promoters on the Board of Directors, but also added that gender diversity of the boardroom was now part of the global corporate agenda.

"I am very happy that India already has this inbuilt into the Companies Act (2013) and now it is compulsory in SEBI also. The belief is, once you have a woman director and gender diversity on the board, corporate governance level will go one step above," Mehta said.

Speaking about the new Companies Act 2013, which was brought in by the erstwhile United Progressive Alliance government, Mehta said that while the new legislation did codify grey areas in the earlier legislation and brought in a lot of innovation like the one-man-company entity or legally allowing for video conferencing for board of directors meetings and allowing scope for corporate governance to blossom and fraud-check mechanisms, there were still several chinks, where were emerging and would take at least a year more to level out.

"This Companies Act 2013 will get settled over a period of time," Mehta said, adding that the Institute was in constant contact with the Ministry of Corporate Affairs over the nagging elements in the law.

"This Act has come after a very long time and there are a lot of challenges in interpretation, drafting and the provisions of the act," he said.

The Companies Act 2013, replaces the Companies act 1956 and provides the legal framework for corporate governance and day-to-day functioning of over 10 lakh companies registered in India.