India’s corporate landscape is largely family-run. As much as 85 percent of the country’s incorporated businesses are closely held. Their underlying values are based on trust and unwritten family codes rather than on the widely-accepted practices of corporate capitalism. While decisions by patriarch-run businesses have a quick response time and are often more adaptable, there are serious concerns too. For instance, one report found that as many as 97 per cent of these companies did not have family constitutions or succession planning documents. Recent history is witness to companies big and small in the throes of crises after the untimely death of a family head.
Where there is a younger generation of stakeholders, issues like environment, social and governance (ESG) concerns and diversity, equity and inclusion (DEI) have become core values. However, a study done a year ago found family-controlled companies were often slow to get the message. With this backdrop, it is indeed good news that the boards of some large listed companies have been steadily expanding to accommodate more directors, making decision-making more inclusive. A recently-released report on corporate governance, fronted by former Sebi chairman M Damodaran, said that as regulatory compliance has tightened, the average membership of the boards of Nifty 100 companies has risen from 9.86 in 2020-21 and 10.48 in 2022-23 to 10.52 in 2023-24.
The report emphasised the need for larger boards, pointing out that with the mandate of five mandatory committees, there ought to be enough board members to ensure they are properly staffed without a crossover of members. There has also been a slow but definite increase in women’s presence in the boardroom. The Companies Act 2013 requires companies with large capitalisation to appoint at least one woman director to broaden decision-making. In the top 100 Nifty companies, the number of women directors has risen from 158 in 2020-21 to 200 in 2023-24. However, they make up just 15 percent of boardrooms—and almost three-quarters of them are independent directors without executive powers—leaving a large gender skew. Large boards do not necessarily mean more efficiency, as some studies point out. In the same vein, faceless corporate capitalism is not, as a rule, better than family businesses. Even then, the trend towards more inclusive boardrooms must be welcomed.