Marquee PSUs slipping on corporate governance standards, says survey

Survey flags gaps in independent directors, women representation, succession planning and SEBI compliance among Maharatna and Navratna companies

A large number of public-sector companies —Maharatna and Navratna — are coming up short on several parameters of corporate governance, including having a minimum number of independent directors and appointing women directors, apart from doing succession planning and a shareholder-satisfaction survey.

 

The fifth “Annual Corporate Governance Survey”, by Excellence Enablers, found 36 such companies in FY25 had fewer than the prescribed minimum number of independent directors and 17 companies had no woman on their board.

 

The Companies Act, 2013, mandates that every listed company have at least one-third of the number of directors as independent directors.

 

“It is our expectation that if public-sector undertakings are not exempt from the provisions applicable to private companies, there would be value addition, leading to better corporate governance,” the report said. 

 

 

The report noted while the presence of a woman independent director on the board had been mandated, there was no similar provision to facilitate women executives graduating to board positions.

 

“This can happen only if a sufficient number of women are provided with appropriate career progre­ssion in the organisation,” the report said.

 

The report highlighted that since 2021-22 (FY22) nominee directors and executive directors had not been paid sitting fees, while noting that if directors were expected to improve corporate performance through their participation in board meetings, it was necessary to compensate them for it.

 

The report has suggested that since independent directors are not entitled to stock options, they can be compensated only through sitting fees and profit-linked commission. 

 

The study has relied on annual reports, stock-exchange filings, and website disclosures of these companies to examine the yardsticks that affect corporate governance.

 

The study has found that 21 companies —from FY22 to FY25 — did not disclose any detail relating to succession planning.

 

According to the Security and Exchange Board of India’s “Listing Obligations and Disclosure Requirements”, 2015, the board of directors of a listed entity must have plans for orderly succession for appointment to the board and senior management.

 

“In the absence of a robust succession planning process, the sudden departure of a Board member or key/senior management personnel could be disruptive,” the study said.

 

The study advocated a hybrid model for conducting annual general meetings (AGMs) to promote in-person interaction, noting that 36 companies had held virtual AGMs and only three had physically met in FY25, broadly in line with the trend in the past four years.  

 

In FY25, seven directors did not attend board meetings, with the report suggesting that discontinuing the appointment of directors who had no attendance in the previous financial year should be considered.

 

Of the 40 Maharatna and Navratna companies surveyed, 32 failed to comply with the regulator’s regulations requiring listed entities to submit a secretarial compliance report for the financial years from FY22 to FY25. Four were unlisted companies, to which the provisions did not apply.