In the case of one third of every mid cap company in India, the roles of the chairman and managing director or CEO were played by the same person. A majority of such companies (66%) do not have a policy for rotation for the members of their audit committees.
These are just few of some interesting insights brought forth in the 2009 study conducted by Grant Thornton – FICCI on corporate governance practices at mid cap companies. The study targeted around 500 listed companies, across various sectors, outside of the top 100 companies in India. The respondents were asked to comment on specific aspects relating to corporate governance practices in their companies.
Clause 49 of the stock exchange listing agreement broadly sets out the compliance related to corporate governance. It lays down the definition and responsibilities of independent directors, board procedure, tenure of non-executive directors, requirements related to audit committees, role and periodicity of meting of audit committee and board disclosure-risk management, etc. Majority of the respondents (68%) felt that clause 49 was adequate to bring requisite levels of transparency in their business and even larger proportion saw the benefits extending to improved processes and controls (84%), enhanced awareness of roles (74%) and better risk management (74%) in their companies.
However, majority of the respondents (61%) felt that compliance norms should differ based on company size. This will enable different sized companies to achieve the desired levels of governance. A major issue faced by the companies is the availability of independent directors and the process adopted to appoint them. Majority of the respondents (56%) disclosed that they did not have a nomination committee to lead the process of appointing independent directors in their companies. Around one-third of the respondents also felt the need to prepare or modify or update a statement in their company policy relating to matters such as energy consumption, employment, recycling and waste management.