More directors paid Rs 1 lakh per board meeting than before pandemic

Number of board meetings have also gone up post pandemic according to Excellence Enablers' Survey on Corporate Governance

A larger number of companies are paying directors sitting-fees of Rs 1 lakh, the highest permitted under the rules, per board meeting than was the case before the pandemic.
 

The share of Nifty 100 companies that pay their directors Rs 1 lakh per board meeting has risen from 37.1 per cent in 2018-19 to 41.4 per cent in 2021-22, according to an analysis of data from the Excellence Enablers’ Survey on Corporate Governance (3rd edition).
 

The report is an initiative by former Securities and Exchange Board of India chairman M Damodaran and chairperson of Excellence Enablers.
 

Damodaran said: “Directors are compensated also through a share in profits. Much of this profit share is given to promoters as commission and a limited amount is paid to independent directors. Most enterprises do not set aside anything near the ceiling amount of 1 per cent of net profit for such compensation. No company is anywhere near that.”
 

The report said: “Taking into account the vastly increased responsibilities of the Board and the Directors, as well as the longer number of hours required for productive Board meetings, it would be appropriate for more companies to increase the sitting fees to INR 1 lakh per meeting … This might also persuade persons who can add value to the Board, but are staying away from Boards, to reconsider their position vis-à-vis Board directorship.”
 

The analysis is based on the share of Nifty 100 companies in each category with the data for each year. This covered 62 companies in 2018-19, 69 each in 2019-20 and 2020-21, and 70 in 2021-22. The share shows a rising trend even as the number of companies with disclosures has risen over the years.

 

Additional data from the report showed the majority of the Nifty 100 companies had fewer than seven meetings a year in 2018-19. There were 51 companies that had four-six meetings a year in 2018-19, and 49 had seven or more. This reversed by 2021-22. Only 44 companies had four-six meetings in 2021-22. The number with seven meetings or more rose to 56. The number of companies with more than 10 board meetings a year has gone up from 19 to 25.
 

Talks with directors suggest some of this might have to do with easier norms for board meetings after the pandemic. Virtual meetings are allowed, which precludes travelling for people who may be away from company headquarters.
 

Independent Director Alok C Churiwala said the number of meetings might also reckon with increasing responsibilities of board members. Many may now proactively seek additional information from companies to fulfil their roles effectively, leading to more engagement than before.
 

“Directors will demand more meetings,” he said.
 

The growing size of companies counts towards more being paid to directors, said another person who serves on company boards.

Rising compliance burden has meant more instances of company matters being reported to the board, and additional responsibilities have come with more pay, according to the person.
 

“Overall remuneration has gone up,” he said.
 

The report noted more companies were compliant with the requirement on constituting boards with at least 50 per cent of their directors being non-executive. The number of companies not complying with this fell from nine (all in the public sector) in March 2021 to none in March last year. The number of companies non-compliant with the independent-director requirement (who must comprise around one-third or 50 per cent of the members, depending on the nature of the board) was 17 (including 13 in the public sector) in March 2021. This fell to one, a public-sector entity, as of March last year.