Independent directors with specialised knowledge contribute valuable insights, ask critical questions and also offer guidance on complex matters. Hence companies are expected to witness higher representation from such sectors in the next two years on their boards, according to the India Board Report 2023-24, brought out by executive search firm Hunt Partners, in association with law firm AZB & Partners and consulting firm PwC.
Domain knowledge of digital and tech is expected to be the basis for 83% of new independent director appointments in the next two years at BSE 200 companies and other large organisations, show the findings of the survey, shared exclusively with ET. Cybersecurity and product developments will be the criteria for 70% and 50% of appointments.
“The pandemic and related lessons in crisis management have helped make boards more resilient and nimbler in reacting to unexpected disruptions — and boards are learning from these to focus on the next set of possible supply chains and other disruptions arising from other external risks as they arise,” said Zia Mody, managing partner, AZB & Partners.
“The importance of corporate reputation and the value of stakeholder trust in the corporate brand is fast becoming a key pillar of the governance premium that some organisations attract, and others aspire to,” added Mody.
Areas of expertise around domain, risk, M&A, corporate finance and audit/tax are also expected to get additional representation on the board.Apart from such hyper expertise, insistence on ESG (environmental, social, and governance standards) will reshape the boardrooms in the coming years, becoming the new growth engine vital for determining how companies create stakeholder value, the report said.“We expect the focus on ESG to leapfrog, not least because of the introduction by the securities market regulator — Sebi — of the Business Reporting and Sustainability Reporting guidelines,” said Arjun Erry, head of board practice at Hunt Partners. “Boards of directors will be charged with ensuring the executive management has implemented best-in-class data gathering, analysis, and reporting mechanisms to comply with ESG guidelines.”
In 2023, BSE 200 companies had the highest gender diversity, with women comprising 22% of the board members. This is a notable change from 2019, where listed MNCs had the highest diversity, with women comprising 18% of their boards.
PwC chairman Sanjeev Krishan said the role of independent directors has evolved significantly due to changing regulations, recent governance failures, outdated controls and complex unstructured data.
“Independent directors are now expected to be discerning guardians of good corporate governance within legal boundaries, wielding objectivity and sharp insights to guide organisations through this transition,” said Krishan.
“The ‘G’ in the ESG is all set to become the most crucial element for organisations to succeed in this transformative era and independent directors can be instrumental in making a difference not just for their organisations but for society as a whole,” he added.