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      • Are you making SIPs to improve your Emotional Intelligence
      • Corporate Governance needs a Moral Compass – Ethics in Indian Boardrooms!
    • August (9)
      • Grow with Governance: ESG is the umbrella for CSR, says Vedanta's Roma Balwani
      • Grow with Governance: PadUp Ventures' Rajat Jain Demystifies Correlation of Governance and Economic Growth
      • Grow with Governance: Family governance impacts the culture of a family-run business, says Equations Advisors' Mita Dixit
      • Entrepreneurial Board
      • NEW REGULATORY PROVISIONS RELATED TO INDEPENDENT DIRECTORS
      • ESG & ITS IMPORTANCE FROM THE POINT OF VIEW OF BOARD MEETING
      • Start early, don't wait till retirement to become an Independent Director, says Increate Value Advisors' Milind Sarwate
      • The winding road of leadership coaching in the post-pandemic era
      • Challenges of Organizational Culture Change
    • February (4)
      • Re-examination of Purpose by the Boards in Post -Pandemic Era
      • What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors
      • Promoter Director – Time to become Custodian of Governance!
      • Diversity and Inclusion – The Board Perspective!
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      • New Directors - Have you done your due diligence
      • Cyber Security Insurance and Boards
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      • Why Advisory Boards Are Important for Indian Business Corporates?
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      • Top 10 Questions to Ask in Boardrooms!
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      • Kindness is key
      • How to Brand Yourself as a Leader of the Company?
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      • Are you hesitant to speak in the Boardroom!
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      • Directors Liability in India
      • Why do promoters need Independent Directors?
      • Corporate Governance Deviation – Infosys Case Study
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      • Tips for Aspiring Independent Directors
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      • Tool for effectiveness of Board Committees - Ask Right Questions
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Promoter Director – Time to become Custodian of Governance!

Promoter Director – Time to become Custodian of Governance!

By Neha Shah- Team MentorMyBoard
Calendar

Feb 17 th 2021

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Corporate Governance as a subject has become extremely popular post India has witnessed some disastrous ethical failures due to lack of appropriate business processes. In early 1990’s specially after the introduction of an important term like Globalization, various reports on Corporate Governance started floating to India making this as one of the hottest topics of discussion. Curiosity of people on critical key-terms like Organizational Structure, Role of Board, Fiduciary Responsibilities, Evaluation of Board, Concentration of Power, Independence of Directors and more started triggering Indian businesses.

Later, in coming years, few companies in order to ensure certain best practices began to understand the essence of Board composition as well the impact of right Board composition on the stakeholders. In the wake of Corporate Governance as a serious matter of concern, it would be appropriate to state that India has grown by leaps and bounds. Corporate India’s attention has evolved from ‘simple management’ to ‘effective governance’. Given the unique challenge that India faces due to predominance of family run businesses, there is a pressing need to move from the Raja and Praja Model to the Custodian of Governance Model with a conscious effort. While some promoters have started realizing that independence in thinking of Boards as their asset, many are still reluctant to distribute their powers with a fear that it may lead to forgoing their ‘promoter throne’.

In India, the control of promoters can be observed through shareholding structure of the Company. Where the concentrated ownership dominates the Corporate landscape, the promoters of the Company take complete power to influence the functioning of the rest of the Board, which is often seen as prejudicial to the interest of the Company. The main rationale behind independence of directors is then questioned. We have seen multiple examples starting from Tata Sons to Coffee Day Enterprise where role of Promoter Directors and authority of Independent Directors to take right decisions were questioned, which ultimately led to governance failures in top companies. Boards’ independence is shadowed by promoter dominance. The role of an independent director is complex when it concerns the family run businesses. Unfortunately, they have to navigate through the family-issues to decide what is in the best interest of the company and its shareholders and accordingly struggle to take right decisions in their favor.

It is well known that in 2017, Kotak Committee with an aim to improving governance standards of Indian Listed Companies came out with a detailed Recommendation Report known as ‘Kotak Committee Report’ wherein major recommendations were introduced to enhance Boardroom dynamics like introduction of new faces to the Boardroom highlighting the concept of ‘Diversity & Inclusion’, separation of the Role of Chairman and Managing Director, exclusion of Board inter-locks i.e. persons who constitute the ‘promoter group’ of listed companies cannot be appointed as Independent Directors in order to avoid common practice of promoters to be on each other’s boards or appoint relatives as independent directors, mandate to appoint Woman Director on Boards, revisit to the Board Composition and more. Despite accepting and rejecting few recommendations of Kotak Committee, it is very critical to understand that the changes that were intended to be introduced were to keep a check on functioning of naughty promoters and ultimately protect the interest of stakeholders of the Company. The real implementation has definitely posed immediate practical challenges for some listed entities and an increased cost of compliance, yet, considering the long-term sustainability of the act, it will certainly ensure better utilization of the time of promoters and establish sound governance systems across all listed companies.

It is high time when professionals and Independent Directors take a stand to make companies realize that the problem lies in the mindset since promoter conceives a business idea and decides to form a Company. Here is where the role of right consultation comes in the picture. Merely forming a company doesn’t help promoters attain their g oals. It is the complete understanding of the law as well as the essence of law that provisions are trying to communicate so as to ensure better governance models since inception. Reconsideration and thorough understanding of terms like independence of boards, accountability, transparency, ownership structure and more is the need of the hour.

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Click Here to Read: What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors

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Category

  • All
  • Boardrooms
  • BOARDROOMS
  • Independent Directors
  • Role of Board
  • Mindset Shifts of Boards
  • Independent Directors and Promoters
  • Sustainability / ESG
  • business implication
  • employee exits
  • COMMITTEE MEETINGS
  • Union Budget
  • Independent Director
  • Grow with Governance
  • Grow with Governance
  • INDEPENDENT DIRECTOR
  • Entrepreneurial Board
  • ESG & ITS IMPORTANCE
  • leadership coaching
  • Change Management
  • Advisory Boards
  • Boards
  • Boardroom
  • Brand Yourself as a Leader of the Company
  • Kindness
  • Are you hesitant to speak in the Boardroom!
  • Governance & ESG
  • Directors
  • Independent Directors
  • Corporate Governance
  • Leader development
  • Gratitude, Purpose
  • decision making
  • Systematic Investment Plans in Emotional Intelligence
  • Corporate Governance
  • The Board’s Role in ESG!
  • Balance Boards
  • Agility and Compassion
  • Governance and Board
  • Diversity and Inclusion
  • Directors,Promoter Directors
  • Board Members, Directors and Independent Directors
  • Board and Senior Management
  • New Directors
  • Cyber Insurance
  • Salary Increment
  • Economy Growth
  • Human Resources
  • Generating Wealth Beyond Money
  • Agile Mindset for Leadership
  • Aspiring Independent Directors
  • Board Leadership
  • Corporate Governance & Women on Boards
  • BOARD MEMBER
  • SME
  • WOMEN DIRECTOR
  • BOARD MEMBERS

Archive

  • 2021
    • April (3)
      • Will you drive your vehicle without a dashboard?
      • Are you making SIPs to improve your Emotional Intelligence
      • Corporate Governance needs a Moral Compass – Ethics in Indian Boardrooms!
    • August (9)
      • Grow with Governance: ESG is the umbrella for CSR, says Vedanta's Roma Balwani
      • Grow with Governance: PadUp Ventures' Rajat Jain Demystifies Correlation of Governance and Economic Growth
      • Grow with Governance: Family governance impacts the culture of a family-run business, says Equations Advisors' Mita Dixit
      • Entrepreneurial Board
      • NEW REGULATORY PROVISIONS RELATED TO INDEPENDENT DIRECTORS
      • ESG & ITS IMPORTANCE FROM THE POINT OF VIEW OF BOARD MEETING
      • Start early, don't wait till retirement to become an Independent Director, says Increate Value Advisors' Milind Sarwate
      • The winding road of leadership coaching in the post-pandemic era
      • Challenges of Organizational Culture Change
    • February (4)
      • Re-examination of Purpose by the Boards in Post -Pandemic Era
      • What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors
      • Promoter Director – Time to become Custodian of Governance!
      • Diversity and Inclusion – The Board Perspective!
    • January (2)
      • New Directors - Have you done your due diligence
      • Cyber Security Insurance and Boards
    • July (7)
      • Why Advisory Boards Are Important for Indian Business Corporates?
      • Grow with Governance: ESG essential to repair the damage economic activities caused to the earth, says CA Shailesh Haribhakti
      • Top 10 areas to contribute in Boards as Independent Directors
      • Top 10 Questions to Ask in Boardrooms!
      • Essential HOWs of Boardroom!
      • Kindness is key
      • How to Brand Yourself as a Leader of the Company?
    • June (6)
      • Leading from the Boardroom
      • Are you hesitant to speak in the Boardroom!
      • The Neem Project a Leadership case study
      • Directors Liability in India
      • Why do promoters need Independent Directors?
      • Corporate Governance Deviation – Infosys Case Study
    • March (4)
      • Board Refreshment: Finding the Right Balance for your Board!
      • HR Governance and Board – How Important Is It?
      • Agility and Compassion: Two Pillars for Boards in the Post Pandemic Era!
      • Modernizing Governance: The Board’s Role in ESG!
    • May (3)
      • Restructuring appraisals in 2021 – Gratitude, Purpose & Meritocracy
      • How do you make your personal Brand?
      • Leadership Coaching: How does it help Leaders
    • October (2)
      • Are Independent Director’s required on the Board?
      • 'Ethics & Governance' lesson should start from school, says Federal Bank's Independent Director, Sankarshan Basu
    • September (3)
      • Grow with Governance: As an Independent Director ensure your voice is heard, says Apurva Purohit
      • Grow with Governance: Push for ESG agenda; pool CSR funds to maximise impact, says Ranganath NK, former MD of Grundfos Pumps
      • Grow with Governance: Boards should prepare companies for different risks, says National Insurance Academy's G Srinivasan
  • 2020
    • August (4)
      • WOMEN DIRECTOR-An Emerge
      • ARE YOUR BOARD MEMBERS SAVVY WITH FINANCIAL TERMS AND EXCEL IN FINANCIAL LITERACY QUOTIENT AS PER COMPANIES ACT 2013 MANDATES.
      • BOARD MEMBER SELECTION- A TASK OF PERFECTION
      • SME IPO – AN OPPORTUNITY TO CAPITALIZE YOUR BUSINESS
    • December (3)
      • Good or bad, Salary Increments always cause a heartburn among employees
      • Is Economic Progress Enough?
      • Emotional Intelligence
    • November (3)
      • Generating Wealth Beyond Money
      • "Agile Mindset for Leadership"
      • Tips for Aspiring Independent Directors
    • September (3)
      • Independent Director
      • Lean Thinking Boards
      • Corporate Governance & Women on Boards
  • 2022
    • August (1)
      • Liability of Independent Directors – An Important Aspect of Corporate Governance
    • February (4)
      • A Hero's Farewell: How to handle employee exits with dignity
      • Green Bonds: An Instrument for Financing a Sustainable Future
      • Tool for effectiveness of Board Committees - Ask Right Questions
      • Russia-Ukraine war and India’s Business Implication
    • July (2)
      • Stagnation or Evolution – Mindset Shifts of Boards when Company sees Stagnated Growth
      • Risk Assessment and Minimization Procedures – Role of Board
    • March (2)
      • A study on Sustainability Report of Container Shipping Companies.
      • India and The ESG impact of Crypto Currencies
    • May (1)
      • Independent Directors liability under GST
    • November (1)
      • Workplace Sexual Harassment and the Role of Board
    • October (2)
      • How many Boards are too many?
      • Women in Indian Boardrooms Vs Diversity = Inversely Proportionate
    • September (2)
      • Organizing for the Future – Important keys to becoming future ready
      • Are you ready to serve on the Board?