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Information technology, environment social and governance (ESG), financial and operational are among the major risks identified by top 100 companies in recent years, according to a survey.
Besides, legal/regulatory, brand/reputation, strategy and Covid related were the top risks identified by companies between FY 2019 and FY2022, the 3rd annual Corporate Governance Survey showed.
While financial risks include risks relating credit, liquidity, interest rate, currency, operations risks are related to business clients, supply chain, vendor and outsourcing.
Some of the other risks which stood out in the four financial years (FY19 to FY22) were lack of succession planning, absence of business continuity plan, inadequate HR/ talent management, geo-political risks, human rights, diversity and inclusion, business ethics and integrity, fraud, IPR (intellectual property rights), Research and Development, risk associated with subsidiaries, and promoters.
The survey has used the annual reports and website disclosures of NIFTY 100 companies as a base to look at parameters that impact on, and manifest, the corporate governance standards of companies. It was conducted by Excellence Enablers, a corporate governance advisory firm founded by former SEBI Chairman M Damodaran.
The top 100 companies include public sector entities, a few private and public sector banks and some of the insurance companies. Around 88 companies are registered in tier 1 cities, 7 in tier 2 cities and 5 in tier 3.
On the board composition, the survey showed that in the previous five financial years (FY2018 to FY2022), the average size of the board of these companies was 11 in each year. In FY22, maximum Board size was 17.
As per the Companies Act, there should be a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a one person company. A company can have a maximum of 15 directors. According to SEBI regulations, the Board of Directors of the top 1,000 listed entities (w e f April 1, 2019) and the top 2000 listed entities (w e f April 1, 2020) should comprise of not less than six directors.
On separation of posts of chair and managing director (MD)/CEO, the survey showed that between FY18 and FY22, 12 PSUs did not have separate Chairperson and MD. In previous 5 fiscals, 17 non-PSUs did not have separate Chairperson and MD.
The survey showed that when it comes to the percentage of women directors on the board, only one company did not have a woman independent director between FY2019 and FY2022. As on March 31, 2022, five companies (including 3 PSUs and 1 PSB) did not have a woman independent director on their boards.
As on March 31, 2022, seven companies had women chairs. There were 26 companies which have appointed a woman as a Key Managerial Personnel (KMP) as on March 31, 2022.
Speaking on the tenure of chairs, the survey said that as on March 31, 2022, average tenure of chairs of 98 boards from the date of first appointment is 15.37 years, with the longest tenure being 49.73 years.
