India Inc faces boardroom gap: Talent for independent directors exists but access remains a hurdle

India Inc. is grappling with a peculiar imbalance. Whereas giant, listed companies face mounting regulatory and investor stress to nominate certified independent directors, a rising pool of skilled professionals from consulting, authorized, and advisory backgrounds stays on the sidelines.

Nevertheless, expertise is not the difficulty: Quite, entry is.

In an ecosystem the place board appointments typically hinge on private networks and rainmaking clout, even essentially the most succesful candidates can discover themselves missed, say authorized specialists. This has resulted in a widening hole between governance and oversight calls for and the theoretically related expertise pool that continues to be untapped.

Information compiled by the Prime Database Group for ET signifies 118 vacant board seats in 61 Nifty 500 firms, and 225 vacancies throughout 143 NSE-listed firms.

Ketan Dalal, managing director, Katalyst Advisors, stated the obtainable pool of impartial administrators is often accessed via search corporations or via generally recognized contacts, though the previous mechanism is much less often deployed. “On this context, whereas there’s probably good expertise of impartial administrators obtainable, the dearth of a community of relationships at their finish is usually a constraint, which impacts the power of firms to entry such administrators,” stated Dalal.

Small Group on A number of Boards

“This impacts the power of firms to entry such administrators. Conversely, (it additionally impacts) the power of potential impartial administrators to search out good firms the place they’ll add worth,” Dalal stated. He’s additionally an impartial director on the board of a number of firms, together with HDFC Life Insurance coverage Co. and Siemens Energy India, amongst others. In whole, 792 people maintain 1,328 impartial directorships in Nifty 500 firms, displaying a small pool serving on a number of boards. Amongst ladies, 461 serve on 642 impartial directorships in 472 firms. The remaining 28 firms have none.

Authorized Mandate

The Firms Act/Inventory Change Itemizing Laws mandate/s impartial administrators make up at the least a 3rd of the boards at each listed public firm.

Additionally, the regulation makes it obligatory for each listed firm to have at the least one lady director on its board. Within the case of the highest 1,000 listed firms by market capitalisation, they’re additionally required to have at the least one impartial lady director on the boards.

Boundaries for ladies administrators stay steep. Regardless of rules, few maintain impartial board roles.

“Too typically, ladies have a token presence to fulfill compliance norms,” stated a associate at a Mumbai-based regulation agency, who additionally serves as a lady director on the board of a mid-sized listed firm. “The problem isn’t provide. Many ladies leaders are certified. Firms should look past box-ticking and recognise the governance and danger abilities they convey.”

Government search corporations urged firms to widen their search initiative and deal with board seats with the rigour of C-suite hires. Additionally they stated aspirants to such positions construct their networks and sharpen their private branding when it comes to thought management.

“Boards stick with acquainted networks and prior expertise, limiting recent views. There may be an untapped bench of execs with regulatory, ESG, digital and danger backgrounds, essential for addressing at present’s complicated challenges,” stated Shweta Rao, vp and head of Vahura OnBoard.