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Institutional EYE

Commentary on Corporate Governance Issues


The board of directors as you know, are responsible for a company’s corporate governance levels. This is also why any measure of corporate governance will focus on the efficacy of the board. For a board to be effective, accountability must be established. Board evaluation is the first step towards establishing a measure of performance and setting accountability.

For the most, boards in India have had a self-imposed sense of responsibility and a largely unstructured performance feedback. Bringing in a mandatory board evaluation has ensured that there is a more comprehensive and structured manner of evaluating boards.

Board evaluations must be undertaken at two levels – at individual director level and at an overall performance level of the board as a whole. Indian companies are well-versed with evaluation of individual performance – and to that extent, most companies have quickly adapted and undertaken a director level evaluation. Evaluating the performance of the board as a whole is a challenge – because it involves not just individual performances, but an assessment of the performance of a group, which has several more dynamics to its functioning beyond individual competence. But, this is what must be encouraged.

Globally, board evaluations are undertaken with the perspective of having a comprehensive set of skills and experience to manage the company’s further growth strategy. This requires board diversity at different levels, yet a strong director camaraderie. In India’s high context culture, evidence shows that companies hesitate to make changes to the board – a December 2015 IiAS research entitled

‘Board Effectiveness – Through the Looking Glass’ showed that 46% of India’s top 500 companies had at least one Independent Director with a tenure of over ten years. Imposing a board evaluation process, therefore, enables companies to have a meaningful discussion over performance of the board and allows them to objectively make changes to the board that are best fitted to the company’s needs. Evaluating boards is relatively new construct in Indian markets. While several companies have been informally giving feedback to directors, mandating the process makes it more formal, and therefore makes it likely to be taken more seriously.

With a view to helping companies acclimatize to the new normal, we present this compendium of board evaluations undertaken by a range of Indian companies

For full report click here

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