The Changing Profile of Indian Boards

Abstract

The Cod bury committee report (1992) placed the corporate board at the centre stage of the governance system that it described as one by which companies are directed and governed. A major port of the debate on corporate governance centres around board composition especially board size and independence. Corporate governance reforms in the US and the UK hove focused on making the board independent of the Chief Executive Officer (CEO) and hence on independent directors. The Cadbury Committee (1992), the Greenbury Committee (1995), the Hampel Committee (1998), the Higgs Committee (2003), etc. have mandated independent directors on the board. Guidelines have been issued in India on the composition of the board of directors that are on similar lines as those given abroad, mandating the appointment of a certain percentage of independent directors. The SEBI Guidelines on Corporate Governance based on the report of the Kumar Mangalam Birla Committee and recommendations of subsequent committees, namely, the Naresh Chandra Committee, the N.R. Narayana Murthy Committee, and very recently, the J.J. Irani Committee have given a mandate for independent directors.

Literature finds that smaller boards are more efficient than larger ones. A larger board impairs the performance of the firm. This paper documents the changing profile of the boards of Indian companies in the light of the guidelines on board composition which have been given by various statutory bodies and committees.