They come from beliefs that still feel true in many Indian promoter-led and family-driven businesses, even when the scale of the organisation has already changed.

One of the most common myths is that governance slows decision-making. But does it really?

In reality, it is usually the opposite. What slows companies is not governance, but ambiguity—unclear authority, overlapping roles, and decisions that move through relationships instead of structure. In many promoter-driven setups, informal control is often mistaken for speed.. However, when accountability is unclear, decisions don’t become faster; they just become harder to trace and harder to fix later.

Governance is also often viewed as a cost centre. More policies. More committees. More compliance. More expense. But governance failures have a habit of being far more expensive than governance itself. The difference is that one cost is visible upfront. The other becomes visible only when something goes wrong.

Another belief is that governance becomes relevant only when a company prepares for an IPO. But is that really how governance works?

This thinking is still deeply embedded in many privately held, family-run organisations. The reality is that governance is never an IPO-stage construct. It is shaped much earlier—through how promoters delegate authority, how dissent, within trusted circles, is handled, and how formal or informal decision-making remains as the business grows. By the time a company enters public markets, governance is no longer being built—it is being tested.

There is also a concern that stronger governance reduces promoter control. But does it really? Good governance is not about taking control away from promoters. It is about ensuring that the business can function as an institution, and not merely as an extension of a few individuals. The strongest promoter-led companies are often those that have learned how to balance entrepreneurial aspirations, with institutional discipline.

Independent directors are still often seen as a compliance requirement rather than a governance force. A necessary presence, not an influencing one. They are sometimes believed to be there to merely make up numbers in the boardrooms, and do not necessarily add value. But in promoter-led companies, the real question is—does challenge even feel acceptable in the room? Or is alignment expected by default? When independence becomes ceremonial, governance becomes performative.

Then there is the most deeply held assumption in many family businesses—that internal trust is enough. And in the early stages, it often is. But what happens when the business grows beyond the founding circle?

As organisations expand across generations, geographies, and professional layers of management, trust starts to fragment. What worked within a close-knit promoter group does not automatically work for an institution. Governance, in that sense, is not a replacement for trust. It is what prevents trust from quietly breaking under complexity.

Closely related to this is another belief—that processes are unnecessary when trusted people are in place. Why create systems when good people can be relied upon to do the right thing? The challenge is that businesses eventually outgrow individuals. Governance exists not because people cannot be trusted, but because organisations become too complex to rely on trust alone.

There is also a narrower way governance is understood—as protection against wrongdoing. But is that really the main risk? Most governance failures in promoter-driven companies do not begin with intent. They begin with unchallenged assumptions that stay embedded because “this is how it has always been done.” And over time, those blind spots don’t stay small—they become structural.

The irony is simple. Governance is rarely questioned when it is missing. It is questioned when it breaks. And by then, the cost is already visible.

Most governance risks do not come from weak systems.

They come from strong beliefs that were never updated.

And in many Indian promoter-led companies, that is the real risk.

Not that governance is absent.

But that it is assumed to already be adequate… because it seems to have worked so far.

Mahima Chopra

The post Common Corporate Governance Myths Indian Promoters Still Believe appeared first on Excellence Enablers.

If the earnings looked good, governance concerns could wait.

That time is gone.

Today, many investors spend as much time understanding governance as they do analysing financial performance. And there is a simple reason for that—profits explain the past, but governance often determines what happens next.

Because a company can deliver strong earnings and still lose value if decision-making is unclear, conflicts are unmanaged, or accountability is weak. Investors have seen this play out enough times to stop treating governance as a secondary conversation.

So, what are they really trying to understand?

Not just board composition. Not just policies on paper. But something more fundamental—how decisions actually get made when no one is watching closely.

Does the board genuinely challenge management, or simply endorse decisions? Are conflicts of interest surfaced early or managed quietly? Does bad news travel fast, or does it get softened along the way? Are related-party transactions truly at arm’s length in practice, not just in documentation?

And importantly—what happens when something goes wrong internally?

Are whistleblower complaints taken seriously, or quietly contained within the system? Are POSH-related concerns addressed transparently, or managed in a way that prioritises reputation over resolution? In some organisations, even uncomfortable issues rarely reach the board in their real form. And sometimes, key governance voices—whether independent directors or senior leaders who raise concerns—simply step away without much noise, leaving little visible trace of what changed internally.

These are not headline issues in most cases. They are structural signals. And investors have become increasingly alert to them.

Because strong governance reduces uncertainty. Reduced uncertainty creates confidence. And confidence translates into what can be called as governance premium—a valuation advantage that companies earn not just through performance, but through credibility, transparency, and consistency in how they are run.

This is why two companies with similar financial performance can end up with very different market perceptions. One may be trusted to sustain performance. The other may be constantly “priced with caution,” even if current numbers look identical.

Many promoters still see governance as a cost centre. Investors increasingly see it as a signal of sustainability.

And the distinction matters.

Because profits can change quickly—quarter to quarter, cycle to cycle. But trust, once questioned, takes far longer to rebuild.

Investor conversations have quietly evolved with this reality. Alongside financial performance, they now probe board effectiveness, oversight quality, related-party structures, succession planning, and even organisational culture. Not as separate governance checklists, but as part of understanding business quality itself.

The shift reflects a simple learning: financial statements show performance, but governance shows durability.

And increasingly, investors are not just asking how much a company earns, but how those earnings came about.

In that sense, governance is no longer sitting in the background of investment decisions.

It is becoming part of the valuation logic itself.

And in a world where capital is more selective, that shift is not subtle. It is decisive.

Mahima Chopra

The post Why Investors Are Looking at Governance Before Profits? appeared first on Excellence Enablers.

Boardroom dynamics is balance of ABC i.e. Alliance, Behaviour and Conversation. This interaction between the board members determines how discussions take place and decisions are ultimately made. It is visible in the way how directors communicate with one another, how open they are to different perspectives and their willingness to engage in constructive, respectful and healthy debates.

For a new Director, it is both an opportunity and a responsibility, when he/she enters into a new boardroom. Understanding its dynamics is not just a useful skill; it is a critical capability for effective contribution as a director.

What are the key areas, a new Director should focus on, to understand boardroom dynamics ?

Observing and listening. Careful and sharp observation helps to understand the board’s unwritten norms and working style. It helps to pay attention to how discussions move, who leads them and how decisions are made.

Understand the informal power chart. Watch-out for who initiates discussions and on occasion, dominates opinions, through experience, personality or alliance. Power in the boardroom does not align with any org chart. Building informal relations outside formal board meetings. Developing them over coffee or lunch. Making time to connect informally with fellow directors for building communication.

Understanding how the board actually functions. Paying attention whether the board is actually open to different perspectives. Is everyone’s voice heard? What is the style of the Chairperson of the board?

Take advantage of available informal support mechanism? Engage in one-on-one conversation that provide valuable insights about the organisation and its culture and sensitivities. This helps to settle in faster and understand quicker.

The bottom line

Understanding boardroom dynamics does not happen overnight. It takes time, requires awareness and critical observation. By observing, building alliances and engaging informally, new directors can find their footing in a way that matters. This strengthens collaboration and supports effective decision-making leading to the organisation’s long-term success.

The post Understanding Boardroom Dynamics for New Directors appeared first on Excellence Enablers.

Corporate governance refers to the processes that direct companies, facilitates transparency, checks accountability of management and their ethical conduct. It strives to create a balance between the varied interests of all stakeholders such as – shareholders, customers and employees. Over time, institutional investors have attained considerable influence over companies owing to their shareholding in such companies. And as with great power comes greater responsibility, it is their duty to actively oversee and shape corporate governance practices in the investee company, while simultaneously ensuring long-term growth and sustainability. Additionally, they must take the responsibility of managing investments in the best interests of all the shareholders. .

Apart from owning significant stakes in the investee companies, another vital role played by the institutional investors includes voting at general meetings, and asking relevant questions. This helps in ensuring that the decisions taken at the Board meetings align with the best interests of the company and other stakeholders. They must do so to promote shareholder democracy.

Role of Institutional Investors in Corporate Governance

Institutional investors play a vital role in moulding corporate governance by proactively collaborating with companies. By using their abundant financial resources, expertise and long-term investment outlook, they can structure the company’s strategy and promote practices that encourage sustainable growth.

1. Strengthen Board Accountability and Independence: One of the major responsibilities of the institutional investors is to help strengthen the Board accountability and its independence. They are the ones who can push for transparent Board nominations, and suggest skillsets to ensure that Boards are capable, responsive and always work towards the betterment of the shareholders.
2. Advocating Ethical Practices and Resolving ESG Issues : Institutional investors play an important role in fostering ethical business practices and incorporating ESG factors into corporate governance practices. By interacting with the companies, they can support corporate culture, ensure effective risk management and sustainability practices. They can also help with ensuring that long-term value is created in line with the global standards and the expectations of the society.
3. Enabling Shareholder Management and Activism: Institutional investors have a significant impact on shareholder democracy. They have the power to ask relevant questions, speak for shareholders’ rights and demand accountability from management. Their interactions result in transparency and accountability, which ensures that the shareholders’ interests is upheld. Active involvement of institutional investors has led to them being able to influence corporate governance. They act as activist investors who advocate for strategy improvement, leadership development and better fund allocation for the betterment of the company.
4. Promoting Long-Term Value Creation : Since the institutional investors are in for a long haul, they would always prefer long-term value creation by promoting sustainable growth strategies, paying attention to capital allocation, executives pay and corporate planning. With their relatively long-term investment strategies, they can collaborate with Boards to make decisions that would work in the best interests of the company and its stakeholders.
5. Managing Power and Aligning Interests: Institutional investors have a significant role to play in creating a balance of authority between the management and the shareholders. With their resources, they are at times better equipped to analyse resolutions. This ensures that management is not working against the shareholders’ interests.
6. Fostering transparency and Accountability : Institutional investors promote transparency in financial reporting. They can exert pressure on companies to meet the regulatory disclosure requirements and hold them responsible in cases of issues like related party transactions, executive remuneration or any kind of mismanagement. They can also interact with the companies to seek clarifications and enquire about the financial policies and other important decisions to support transparency. Their careful monitoring results in improving corporate accountability, safeguarding shareholders’ interests and other transparent business practices.

Additionally, the institutional investors may also end up securing a Board seat, allowing them to play a more influential role in governance. After becoming a Director, the nominee can play a significant part in shaping corporate policies and processes and in holding management accountable. The more the degree of involvement, the more their ability to bring change.

The Stewardship Code: A Key Instrument for Institutional Investors

The Stewardship Code is one of the key frameworks that defines the role of institutional investors in corporate governance in India. It is a set of rules that have been designed to encourage the institutional investors to prioritize the welfare of the companies they invest in.

In 2020, the Securities and Exchange Board of India (‘SEBI’) introduced the Stewardship Code to promote the role of institutional investors in strengthening corporate governance and aligning their actions with sustainable, long-term value creation. The Code focuses on transparency, active participation with companies and monitoring the investments constantly.

Apart from this Code by SEBI, other regulatory authorities in India, such as Insurance Regulatory and Development Authority of India (‘IRDAI’) and Pension Fund Regulatory and Development Authority (‘PFRDA’) have also initiated their segment specific stewardship-related guidelines.

Impact of such Stewardship Codes

The impact of Stewardship Codes in India is phenomenal. They advocate active interaction among institutional investors and investee companies. The Codes also promote responsible voting rights and demand transparent practices via disclosure of voting and investment policies.

Challenges and the Road Ahead

There are a number of challenges that institutional investors face in their role as influential players in corporate governance. Some of them include

1. Stewardship Code Implementation – Although the Stewardship Code has been mandated by Regulators in India, its complete implementation is still under process.
2. Striking a balance between ESG and Financial Goals – The incorporation of the ESG strategies in investment strategies would require a great amount of balance. Not all investors are capable of assessing long-term ESG risks and opportunities. This becomes more prominent when the companies show their reluctance to adopt ESG practices. Engagement with companies, to make them understand the importance of ESG, is a way out.
3. No Transparency – One of the major roadblocks of access to information is the lack of transparency by some companies. Quality of disclosures has to be improved.
4. Complicated Global Regulations : Where the institutional investors possess a diverse portfolio, they can come across various challenges while managing compliance across various regulations in different countries. Bigger investors have big teams to oversee cross-border compliance frameworks, but the smaller ones often grapple with this problem.
5. Agency Conflicts : In case the institutional investors put their interests first, over those of other stakeholders, a situation of conflict of interest would arise. Such misalignment would potentially affect the long-term shareholder value negatively. Accountability and transparency can go a long way.

Conclusion

Institutional investors play a vital role in developing corporate governance practices in India. They must however be more actively involved in raising questions and ensuring shareholder democracy.

The post How Institutional Investors Shape Corporate Governance in India appeared first on Excellence Enablers.

As per Global Reporting Initiative (GRI), “A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. A sustainability report also presents the organization’s values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.”

Lately, the Sustainability Reporting has drawn widespread attention. The factors that can be held responsible for this attention include changes in environment, changes in climate, and the focus on employees, as stakeholders of business. They have been the reason that finally made companies look beyond the financial parameters, and consider sustainability as a requirement, rather than a choice.

It has been noticed that the companies have started to report more frequently on ESG parameters, often voluntarily. These disclosures are often related to environmental factors like waste generation, utilisation of water and energy. They include social factors such as wellbeing of employees and workers, efforts in creating a diverse workforce. Governance related factors that are often disclosed are Board composition, the committees and their composition, and actions taken towards stakeholders, such as vendors, suppliers, contractors and society. Companies are finally acknowledging the need to be responsible for the impact of their actions on the environment and the society at large.

Benefits of Sustainability Reporting include

• Helps in management/mitigation of risks- Most companies face ESG related risks. A structured reporting system enables the companies to recognize and mitigate risks. It may contribute to gaining a competitive edge.
• Better financial performance – It is believed that there is a direct relation between sustainability and financial performance. Experts suggest that markets view companies that make ESG reporting a priority, favourably.
• Strengthen stakeholder relationship and effective communication- It aids the companies when they consider any concerns of stakeholders in the decision-making process, and effectively communicate the efforts undertaken for them.
• Enhanced reputation – ESG reporting makes companies be viewed in a totally different light by the stakeholders.
• Better workforce – Companies that give importance to ESG end up attracting talented professionals to work with them.
• Capture Investors – It is clear that the investors at large would want to prefer the companies that are ranked high on ESG parameters.

According to the Companies Act 2013, all companies are required to indicate their efforts regarding energy conservation in the Directors’ report (in their Annual Report). Additionally, SEBI has also made it mandatory for the top 1000 listed companies to publish the Business Responsibility and Sustainability Report (BRSR), which is a step towards reporting on the efforts on ESG.

Challenges of Sustainability Reporting include

• Ambiguous definition of Sustainability – Sustainability cannot be defined universally. This makes the purview of sustainability too large, and hence difficult for the companies to collate information and present a report on it.
• Diverse reporting standards and frameworks – The reporting standards and frameworks for Sustainability Reporting are not uniform. Some of them include the Carbon Disclosure Project (CDP), the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). Each of them has their own set of guidelines that are to be followed. This makes the reporting challenging. Interestingly, in September 2020, all the five major reporting standards took notice of this and expressed their intention to consolidate their reporting requirements that would make the Sustainability Reporting uniform and easy to practice.
• Time-Extensive reporting – The data that is expected out of this report is quite extensive and time consuming, especially for smaller companies.
• Confusion within management – The personnel required for such reporting have to be educated about the requirements and well-trained in reporting on them. The standards of the reporting are likely to be compromised if there is any lack of coordination between the different departments. The accuracy of the data determines the authenticity and goodwill of the organization.
• Intangibility of the ROI status of the reporting – It is known that Sustainability Reporting helps the companies and they are rewarded for it. But there is no clear evidence to show that there has been substantial improvement in the financial performance of the organizations that have been following this reporting.

Role of Board

The Board of a company plays a vital role when it comes to Sustainability Reporting. The outlook of the Board about the importance attached to sustainability is directly proportional to the efforts that a company makes towards it. A number of Boards have constituted Board level committees that deal with ESG and Sustainability. In fact in some companies, a part of the variable pay of the senior management personnel is dependent on the sustainability efforts of the company. Reporting under BRSR too requires Boards to view the disclosures.

It is important for each company to have its own priorities set for sustainability efforts. It is also important that the right persons in the company focus on quality and correctness of these disclosures.

The post Navigating the Complexities of Sustainability Disclosure appeared first on Excellence Enablers.

While fulfilling the responsibilities, RBI also needs to ensure that the Regulated Entities (REs) under it remain as diligent as possible, are compliant with all the concerned laws and regulations, and adhere to the fundamental principles of good conduct. Because of being a Regulator, RBI is considered one of the stewards of Corporate Governance with respect to the banking sector. The need to inculcate Corporate Governance stems from the responsibility the RBI has towards the protection of interests of the stakeholders of the entire banking sector.

Over the last few decades, the RBI has been at the forefront of creating rules and regulation, and amending the existing ones, if required, thus ensuring that the requirements of sound Corporate Governance are accordingly met. Many laws and regulations become outdated with the passage of time, and thus the need to bring new ones/ amending the existing ones arises. In the light of such advancements, RBI had set up a Regulations Review Authority (RRA) in 1999. RBI happens to be the only Regulator that has set up an authority that reviews the existing regulations, circulars and other reporting systems to remove regulations that cease to be relevant. RRA 2.0 was established in 2021, with the aim to reduce the compliance burden on REs, through simplification of the regulatory instructions and standardizing reporting requirements.

Irrespective of the continuous efforts, there are several issues that the REs face, namely :

• Cost-Extensive Compliance – Since the compliance can be cost-extensive, Regulators should be mindful of the same, especially with regard to smaller entities. Additionally, frequent changes can become troublesome for the REs. What they need is continuous efforts to conduct regulatory impact assessment before introducing newer regulations.
• Board structure and effectiveness – As per RBI mandate, it is compulsory for the Chairperson of the Board to be separate from the Managing Director. Even though it is a great move, there are a few Public Sector Banks that do not have a Chairperson for extending time periods. Also, there exists such Boards which have vacant Independent Director positions. It is time that RBI needs to take appropriate measures to make sure all such positions are filled without any further delay. Such vacancies are a major source of gaps in boardroom functioning.
• Setting-up of mandatory Board-level committees – In the banking industry, it is imperative for all the banks to constitute more than 10 mandatory Board-level committees. If more than one committee has a mandate similar to another, then the two can be combined to make the functioning more effective. A relevant example of the same can be merging the Stakeholders Relationship Committee with the Customer Service Committee, since one of the major stakeholders are the customers of the bank.
• Number of meetings – It turns out that banks eventually end up having more meetings than the minimum number, whether for Board or other committees. As a result, the capacity of management personnel gets highly compromised. Due to the higher frequency of meetings, the time required to take the actions, both pre and post meetings, get restricted.
• Managing Risks – Even though RBI always tries to stay one step ahead with its effective risk management framework, newer risks keep evolving, thus making this an ongoing process.
• Unsatisfactory consultative process – RBI needs to follow a more consultative process before introducing any regulations/amendments. This would help RBI take note of the practical challenges faced by REs. Their suggestions would help our country come at par with the best global practices.
• Safeguard Investors’ Interest – The protection of the interest of investors is important. In cases of bank failure, the depositors are given protection of up to Rs. 5 Lakhs, whereas this limit is Rs. 25 lakhs for investors in capital markets. To make the investors aware of their rights, it is important that measures be taken to provide better investor education.
• Capacity building – The focus of the regulatory bodies should be on capacity building, in order to help REs employ better quality personnel. It can also help in fostering fruitful conversation between the Regulator and the RE.

Fintech companies have seen tremendous growth, all thanks to aggressive lending practices. Due to this, RBI’s supervision towards them has increased significantly. Nonetheless, the legal framework and other regulatory processes for such companies would still need improvement.

To strengthen financial inclusion efforts, the licensing of Small Finance Banks (SFBs) was implemented in 2014. SFBs were ought to to play a vital role in expanding the scope of financial services to the marginalized, while attaining comprehensive growth. To its surprise, RBI has raised concerns over increased asset quality stress, and high concentration risks relating to SFBs. Further problem areas point to the gaps in Corporate Governance and succession planning. To combat this issue, RBI is now planning to merge some of the SFBs to avoid concentration risks.

The confidence and belief the countrymen have in the financial institutions are imperative for any country to prosper. The goal is to have a proper framework that would establish and uphold it.

The post Governance Risks in India’s Banking and Financial Sector appeared first on Excellence Enablers.

Understanding Board’s effectiveness

A Board becomes effective when Directors have clarity of their role, and when they contribute meaningfully as a group, while fulfilling their individual responsibilities. An effective Board should also have a constructive relationship with the management, wherein while empowering the management, it also holds the latter accountable. Such a Board is also known to promote stakeholders’ interest.

Effectiveness of a Board cannot be measured in quantitative terms. In order for it to deliver value, the Board should be conscious of creating value for the company.

Some questions that an effective Board must ask itself include: Are the Directors adequately prepared for future challenges? Do they possess industry relevant expertise? Are they clear about their roles and responsibilities? Do they have the skillset required to guide the company?

Recognising the importance of an effective Board, the following are key five factors that enable Boards to deliver value, and to be effective:

1. Proper Board and committee composition
   The composition of a Board is the foundation for its effectiveness. Composition both numerically and qualitatively is important. Inadequate composition will not only result in regulatory non-compliance and penalties, but also deprive the Board of diverse perspectives. The composition of Board and its Committees should not only meet the minimum compliance standards, but should be adequately and properly constituted, with appropriate mix of executive and non-executive directors. Diversity in terms of background, experience, age, gender and geography should also be considered. Board-level committees play an integral role in ensuring that the Board performs effectively, making their composition equally critical. Before inducting new Directors, the Nomination and Remuneration Committee must ensure that it identifies the experience required from the incoming Director. It must also ensure that each Director is a member of at least 2-3 committees of the Board, to ensure equitable workload.

2. Role clarity
   Role clarity is essential to ensure that the Board is effective, and it does not stray into management domain. Although, statutory and regulatory frameworks outline the role to be performed by the Board/ Director, there continues to be some lack of clarity.  To address this, law has mandated the requirement of issuing a letter of appointment to each Director, setting out the clear expectations from him/her. Additionally, it is important for each company to organise a proper induction programme for a new Director, to help him/her gain clarity about the role.

3. Proper and robust Board processes
   Effective Boards are supported by the presence of proper and robust Board processes. These include setting up of an annual calendar for meetings, timely circulation of agenda, along with the necessary agenda notes, a proper and complete action taken report, and accurate reporting on compliance.

4. Board cohesiveness and Board-management interface
   Board cohesiveness reflects the ability of Directors to work together as a team, in a constructive manner, to further the goals of the company. Proper communication between the Board and the management is a non-negotiable requirement, as they work together to further the objectives of the company. Constructive tension, and not of peaceful coexistence, with no questions asked, and no answers given, should be the nature of relationship between the Board and the management.

5. Performance evaluation and review
   A robust process of Board evaluation is considered key to improving Board performance. The performance review should assess what the Board is getting right, and what it needs to improve. It should also focus on reducing or eliminating the unproductive activities that the Board might be undertaking. The exercise should result in a proper feedback mechanism, and an action plan being drawn, with timelines attached to actionables. Focus should not be lost of future needs of the company while assessing the Board.

A Board focussed on the long-term success of the company should ensure that the five drivers mentioned hereinabove are functioning at all times.

Nidhi Kapoor

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It is critical to understand the fundamental distinction between the roles of the two vital pillars of any company, the Board of Directors and the management. Given their respective positions, the roles of the two significantly differ in terms of their duties, responsibilities, authorities and focus.

In India, in companies with a dominant shareholder, such as the Promoter-led companies, the boundaries between the roles of the Board of Directors and the management often blur. This leads to potential conflict of interest and governance lapses. Therefore, it is essential to ensure that the roles of the Board of Directors and the Management are clearly defined and differentiated. The same should also be documented.

Board of Directors and Management

The Board of Directors is a governing body of a company, comprising experienced individuals, who are elected by the shareholders. The Board’s role is superintendence, direction and control. Its foremost duty is to protect the interests of all stakeholders, including shareholders. A Board is expected to provide strategic direction, hold the management accountable, and ensure effective governance, and long-term value creation. Board’s primary role is to govern.

The Management refers to the full-time employees, led by a designated head, often called Managing Director or CEO. Management is responsible for the company’s day-to-day operations, and ensures execution of decisions approved by the Board. Management is accountable to the Board, and operates under its guidance and delegated authority. Management’s primary role is operational decision-making and execution.

Role clarity

The role of Board of Directors and Management are distinct yet interdependent. The Board is responsible for strategic oversight and governance, and the management is entrusted with execution and operations.

However, due to the absence of any legal or established framework, there is often an ambiguity relating to these roles, which causes avoidable overlaps. This also causes blurred accountability. Also, in a situation where there is a promoter or dominant shareholder, it is often seen that the same individual or family often performs the role of Board and management.

A lack of role clarity or an overlap in the roles can result in:

• Conflict of interest
• Hindrance in company’s operations
• Micromanagement by the Board
• Board getting into management domain
• Deteriorating Board independence
• Dilution of accountability and transparency
• Blurred line of control
• Sub-optimal performance of Board level Committees

For the Board and the management to perform effectively, there should be clarity of their respective roles. Companies should have proper documents, such as Board and committee Charters, which define their roles, responsibilities and authority.  It is also important that this should be communicated to each Director, so that there is no overreach on his/her part.

In an ideal situation, Board and Management should work together without stepping on the shoes of the other.

The post The Fine Line Between Oversight and Execution – Board v/s Management appeared first on Excellence Enablers.

Role of a Board/ Director

The role of the Board, as a collective of Directors, is superintendence, direction and control.

The primary role of each Director, whether Executive or Non-Executive, is to safeguard the interests of all the stakeholders of a company, including, but not limited to, the shareholders. In the process, he/she also plays the role of a watchdog, to ensure transparency in the functioning of the company, so that no frauds and wrongdoings are committed by management personnel. He/she also ensures that proper systems have been laid down, so that the company performs to promote and achieve its objectives.

Responsibilities of a Director

While a number of responsibilities for a Director are given under the Companies Act, 2013 and SEBI LODR Regulations, 2015, the overarching responsibilities include –

• To act in good faith, to promote the objects of the company for the benefit of all the stakeholders.
• To act in accordance with the Articles of the company, and laws and regulations.
• To exercise reasonable care, skill, and diligence whilst carrying out his/her role.
• To exercise independent judgement while taking decisions.
• To avoid any situation of conflict of interest, that could impact on independence of thought.
• To not disclose any confidential information about the company.
• To not indulge in insider trading.
• To ensure compliance of laws and regulations by the company.
• To not misuse the office of Director.
• To attend all meetings of the Board and committee, as also the AGM.
• To come prepared for meetings and constructively challenge management.
• To ask for additional information, if required.

 Rights of a Board, as a collective body

While a number of rights are provided to the Board under the Companies Act, 2013 and SEBI LODR Regulations, 2015, the overarching rights include –

• To decide on Board and committee composition, including appointment of Chairperson.
• To finalise strategy, along with management.
• To discuss the business of the company.
• To decide annual operating plans and budgets.
• To receive a compliance certificate, as well as steps taken/ planned to be taken by the company to rectify instances of non-compliances, if any.
• To have an overview of legal matters.
• To have exposure to risks being faced/ anticipated by the company.
• To decide the process of succession planning for both the Board and senior management.

 Rights of a Director

• At the time of onboarding, a proper induction programme.
• To receive notice and agenda papers of board/committee meetings sufficiently before meetings.
• To participate in board/committee meetings.
• To have access to accurate, relevant and timely information for fulfilling his/her responsibilities.
• To have access to the minutes, official documents, and financial statements of the company.
• To have the company take a Directors and Officers (D&O) insurance policy, of adequate coverage.
• To receive remuneration by way of sitting fee, stock options (not applicable for Independent Directors), profit linked commission, and reimbursement of expenses for participation in the Board and committee meetings.
• To receive legal advice for any matters relating to the company.

 The consequences of a Director failing to perform his/her role can be severe. These could include liability (civil or criminal), monetary penalties, reputational damage, and in extreme situations, disqualification from directorship.

The post A Director’s Guide: Roles, Rights and Responsibilities appeared first on Excellence Enablers.

A Board meeting is far more than a statutory requirement. It is important for decision-making, strategy-setting, oversight, and accountability. When planned properly, it goes beyond meeting compliance needs, to becoming a place for informed debate and collective leadership.

However, many companies do not derive value from such meetings. Poorly constructed agendas, incomplete agenda documents, inadequate preparation, excessive time spent on routine items, and lack of meaningful participation often result in meetings that fall short of their purpose. The true value of a Board meeting lies not in its occurrence, but in how effectively it is structured to enable Directors to focus on what truly matters, take appropriate decisions, and drive outcomes.

Role of Board Meetings in Corporate Governance

Board meetings are where corporate governance translates into action. They are essential for:

• Reviewing and approving strategy;
• Ensuring risk and compliance frameworks;
• Evaluating financial and operational performance;
• Constructively supporting and challenging the executive team;
• Ensuring promoting of stakeholders’ interest.

Board meetings tend to become ceremonial exercises when they lack proper structure and are dominated by routine updates and compliance formalities. Meaningful oversight is then not achieved, leaving limited time for discussing critical business matters, and decreasing the Board’s ability to add strategic value.

In contrast, when Board meetings are properly structured to be decision-oriented and forward-looking, Directors are able to apply their collective expertise, rather than merely reviewing documents.

Some of the key elements to ensure effectiveness of Board meetings are

1. Structuring the Annual Calendar and Agenda

Annual Calendar

An annual calendar, covering at least a full 12-month period, sets the stage for proper discipline for meetings. Directors are senior professionals, with multiple responsibilities, and may not be available at short notice. Therefore, preparing a calendar well in advance, and sticking to it, is essential to ensure their availability and participation.

As a good corporate governance practice, companies should plan at least six Board meetings per year, allowing adequate time for discussions on strategy, risk, talent, succession planning, and not just quarterly financial results. This structured planning should apply not only to the Board, but also to the Board committees, helping to build a culture of preparedness and accountability. A well-structured calendar also helps management and the Company Secretary align preparatory timelines and meetings, to ensure Board efficiency and effectiveness.

Agenda for meetings

A Board meeting’s effectiveness largely depends on how the agenda is designed. Agenda items should be prepared “with” the Board, and not “for” the Board. A forward-looking, strategic, well-sequenced, and clearly articulated agenda helps improve the Board meeting’s quality and discussions.

Some of the key elements of an effective agenda are:

• Segregate routine and compliance items: Routine noting items must be clubbed together to save time. A grouped summary for updates that do not need deliberation can be prepared. For compliance matters, exception reporting can be used, where the focus is on highlighting only issues or deviations, rather than listing all compliant items. Executive summaries can be prepared where necessary.
• Prioritise strategic items: Critical topics such as business items, capital allocation, M&A proposals etc should be taken up for discussions at the beginning of the meeting.
• Assign time slots: Indicative time can be allotted to each item for better time management.
• Seek Directors’ inputs: Inviting suggestions from Board members, while planning agenda, ensures relevance and inclusiveness.
• Place executive summaries:One-page executive summaries, highlighting the key aspects of a proposal help in discussions.
• Ensure advance circulation:When the agenda and agenda notes are circulated to Directors well in advance, ideally at least 7 days before the meeting, it gives them sufficient time to review the material, and come prepared. Sending agenda, without agenda notes, prevents Directors from coming prepared.
• Include Action Taken Report (‘ATR’):Incorporating an ATR in each Board and committee meeting, to follow up on decisions/ actions from previous meetings, will help track pending actions, monitor progress, and reinforce accountability.

2. Pre-Meeting Preparation: Information Flow and Board Papers

Timely distribution

The Board meeting notice and agenda, along with supporting notes, should be sent at least 7 days in advance, allowing Directors to come prepared and contribute meaningfully. This also enables Directors to ask for any supplementary information that may be required ahead of the meeting. Exceptions to the 7 day rule may be made for items containing Unpublished Price Sensitive Information (‘UPSI’), which can be shared closer to the meeting date, subject to regulatory compliance and prior Board approval.

Board Papers and its Quality-

Well written Board papers should:

• Be concise and complete
• Follow a consistent format for context and analysis, and recommendation
• Focus exception reporting
• Include an executive summary.

3. During the Meeting: Facilitation, Participation, and Purpose

Time Management and Information Flow

To facilitate decision-making,

• Board meetings should start and end on time.
• An indicative time should be mentioned against each agenda item, with more time being allocated for items requiring discussions and decisions.
• Time should be allocated for brief updates from Committee Chairs.
• Items focussing on strategy, risk, and business matters should be taken up first, before routine updates.

Role of Chairperson

The Chairperson plays a crucial role in the conduct of the meeting. Successful Chairpersons have been seen to ensure that:

• The meeting is focused on strategic outcomes.
• All Directors actively participate.
• Open-ended questions are asked to foster balanced dialogue.
• Decisions are summarised clearly.
• Consensus is ensured.

Role of Chief Executive Officer (CEO)

The CEO should use the meeting to seek Board inputs on challenges faced by the company. He/she should not focus on only presenting updates. By providing context and openly sharing key concerns, the CEO enables Directors to give strategic guidance, while understanding constraints.

Role of Directors

Directors must come prepared. Their role is to ask thoughtful questions, provide strategic input, and avoid getting into operational details. Maintaining confidentiality and refraining from side discussions, is essential to keep the Board meeting focused and effective. Directors should constructively challenge management.

Discourage Pre-Board Meetings

Pre-Board meetings, with select Directors, undermine collective decision-making, and risk UPSI leakage. It also promoted information asymmetry. All discussions must happen with equal access to information.

Briefing of the Chairperson

The Company Secretary or CEO should brief the Chairperson in advance about sensitive matters, key agenda items and expected discussion points. This enables to facilitate the meeting effectively.

4. Engagement Between the Meetings

There should be continuing communication between the Board and the management, and it should not be restricted to only meetings. This helps Directors to stay connected with the business. It also reduces information gaps.

This can be done in the following manner:

• Monthly updates by CEO.
• Engagement of Directors with business heads, auditors, and/or customers, keeping the CEO informed. Care should be taken to ensure that this is not too frequent.
• Site visits and informal Director-management interactions.

5. Post-Meeting Actions: Minutes, ATRs, and Follow ups

Minutes of the Meeting

Minutes serves as the official records of Board and committee deliberations, and care should be taken while drafting them.

They should not merely record outcomes, but also capture key discussions, rationale, dissent (if any), and action points. It must be ensured that:

• Minutes are sent within stipulated timelines;
• Invitee attendance is clearly marked;
• Final minutes are signed by the Chair and Company Secretary, within the timelines stipulated by Secretarial Standards.

Action Taken Report (ATR)

An ATR is the best control mechanism for the Board. It clearly tabulates the actions required to be taken by the management, and the status of the same, along with timelines and process owners. Care should be taken that an item should not be removed from the ATR till it is completed. Care must also be taken to avoid giving unclear status of the actionables.

Feedback and Evaluation

Post a Board meeting, the Company Secretary should capture the feedback, whether structured or unstructured, of Directors to help assess and improve the effectiveness of the meeting. Unstructured feedback allows directors to provide inputs freely on the overall meeting experience. Regular feedback fosters a culture of continuous improvement, and enhances Board functioning.

6. Use of Board portals

A number of companies use Board portals for sending agenda, papers, and minutes. This helps in providing a secured communication forum to prevent the fear of leakage of UPSI. It also helps in proper archiving of documents.

7. Quality over Quantity

More meetings do not guarantee quality. Although, regulatory provisions mandate at least 4 meetings, it is ideal to have at least 6 meetings in a year, including some in-person meetings, to facilitate candid interactions and trust-building.

Conclusion

A well-structured Board meeting is at the core of promoting corporate governance.

Ultimately, the goal of every Board meeting should be to unlock the collective wisdom of the boardroom for the benefit of the company.

-Nidhi Kapoor

The post How Do You Structure Board Meetings for Maximum Effectiveness? appeared first on Excellence Enablers.