Corporate Governance Scores – Committing to Stakeholders
A survey by Institutional Investor Advisory Services (Proxy Advisors)
The May, 2025 edition of ‘The Hub’ highlights an analytical report from prominent proxy advisory firm ‘Institutional Investor Advisory Services (IIAS)’ which focuses on adherence to corporate governance norms by companies and assesses BSE100 companies on their governance practices. The key theme of the report is “Committing to Stakeholders”, with a strong emphasis on sustainability, climate resilience, and equitable treatment of shareholders. The scores have been computed based on filings for 2023-24.
Key highlights
- General Trends
- No company scored in the “Basic” category (below 50) for the first time in nine years, reflecting an overall improvement.
- Median BSE100 score declined slightly to 61 (from 63 in 2023), largely due to a stricter scoring model and increased PSU representation.
- The Sustainability and Resilience category saw a median score rise to 63, reflecting increased corporate focus on ESG metrics.
- Leadership & Next Leaders
- Companies such as Infosys, Axis Bank, HDFC Life, Wipro, and Tata Consumer were categorized as "Leaders".
- Firms like HDFC Bank, Kotak Mahindra Bank, Tata Motors, and Hindustan Unilever fell into the "Next Leaders" category.
- Industry & Ownership Trends
- IT and Telecom & Utilities sectors led in governance scores.
- MNCs and widely held firms outperformed promoter-led and PSU companies, although promoter-led entities still made up 64% of the BSE100.
- PSUs dragged down category averages due to weak board composition and independence.
Thematic Insights
Board Governance
- Board independence rose significantly following mandatory refreshes due to the 10-year director tenure limit. However, some companies tried to bypass the spirit of reform by rotating familiar faces or appointing relatives.
- Gender diversity improved marginally; 20% of board seats are now held by women, but only 5 companies have a female Chairperson.
- Board skill diversity remains uneven, with 12 companies lacking industry-specific expertise among independent directors.
Executive Remuneration & Succession Planning
- Promoter compensation remains contentious; 25% of related resolutions were passed only due to promoter votes.
- Only 52 companies aligned pay with performance over the past three years.
- Succession planning is improving, but disclosure and rigor are lacking, especially in family-led businesses.
ESG & Sustainability
- A revised G20/OECD principle introduced the Sustainability & Resilience category.
- 88% of companies have board oversight of ESG, but only 37 sought assurance beyond mandated BRSR Core reporting.
- Only 35 companies disclosed Net Zero targets, and fewer outlined interim goals or action plans.
- The UN Sustainable Development Goals (SDGs) are being increasingly adopted, though practices are uneven.
Investor Relations & Shareholder Rights
- Shareholder engagement is improving, yet 40% of companies still lacked full board attendance at AGMs.
- Only 37 companies publicly listed dedicated investor relations contacts.
- Promoter control continues to undermine minority shareholder influence—25% of promoter pay resolutions passed despite majority minority dissent.
- 65 companies disclosed dividend policies, but many missed targets without explanation.
Audit & Financial Transparency
- 73% of companies had clean audit reports in 2024.
- Internal audits were found to lack independence in many cases; only 38% reported directly to audit committees.
- Segment reporting and risk disclosures improved, particularly on climate and cyber risks.
While Indian corporate governance has seen improvements—especially in sustainability and board composition—key gaps remain in board independence, succession transparency, promoter control, and executive compensation accountability. The revised scorecard methodology, tougher standards, and regulatory pressure are pushing companies in the right direction, though consistent, meaningful reforms are still needed.
Note: IICA duly acknowledge the ownership/authorship of the report and re-publishing the same only for educational purpose of Independent Directors.
