Maharatnas, Navratnas Now Appointing Younger Independent Directors: Survey

The average age of independent directors (IDs) on the board of directors of Maharatnas and Navratnas has fallen from 61 years in 2018-19 (FY19) to 55 years in FY22, a report released on Wednesday showed.

According to the "Survey on Corporate Governance in Maharatna and Navratna Companies" released by Excellence Enablers, the age of the youngest ID on board has also fallen from 43 to 40 years.

The age of the oldest ID on the board of these companies has also fallen from 77 years in FY19 to 74 years in FY22. 

The survey was conducted to look at the performance of Maharatnas and Navratnas in corporate governance on the basis of parameters considered significant to understand the governance scenario. It used annual reports, stock exchange filings and website disclosures of these companies to draw conclusions.

"It is gratifying to note that contrary to public perception, there are a few relatively young IDs on the boards of PSUs," the report said.

It also showed that IDs regularly participate in board meetings of these companies, as no ID had zero attendance in these meetings in FY21 and FY22. 

The report highlighted that the representation of women on the board of directors has also improved. As of March 31, 2022, only two companies had no women directors on their boards. This was seven in FY20.

Moreover, in FY20, 13 companies had no women IDs on boards. This has now fallen to four.

However, the average age of women directors has fallen marginally from 13 per cent in FY19 to 11 per cent in FY22.

But there are some concerns regarding the appointment and tenure of IDs.

According to guideline 3.1.4 of DPE Guidelines, 2010, in the case of a public sector company listed on the stock exchanges and whose board of directors is headed by an executive chairman, the number of IDs shall be at least 50 per cent of board members. Like all other public sector companies, at least one-third of the board members should be independent directors.

Out of 23 companies surveyed, nine had less than the prescribed minimum of 50 per cent IDs in FY22, making them non-compliant. Of these, five have been common for the last four years.

The report also highlighted that the average tenure of IDs has fallen sharply from 2.21 years in FY19 to 0.69 years in FY22.

Under section 149(10) of the Companies Act 2013, an ID shall hold office for a term of up to five consecutive years on the board of a company. But they are eligible for reappointment if the company passes a special resolution and discloses such an appointment in the board's report.

The Department of Public Enterprises (DPE) has a fixed tenure of an ID of three years.

"It is noted that the average tenure of IDs in the last 4 FYs was less than the tenure of 3 years prescribed in the DPE circular. It will be beneficial for the tenure of IDs to be progressively moved upwards to be in sync with the provisions of the Companies Act, 2013," the report added.