INSTITUTIONAL EYE Indian Corporate Governance: A five-year progress report 27 Mar, 2024

Each year for eight years now, we have been scoring the BSE100 companies on their governance. We published the ‘scores’ based on data for FY23 earlier this month. Using this data, it is time to look back at corporate India’s governance practices over 5-years.

First, is it possible to measure something as fuzzy as governance? The scorecard approach attempts to do just this, by first breaking down the various elements and then assigning it a score. For example, while looking at a firm’s dividend distribution policy, you first look at whether the company has a policy or not. If so, you look at elements of the policy, for instance, disclosure of a dividend payout ratio or a range. And finally, you look at evidence of adherence to policy or explanations for non-compliance.

As these elements span across parameters like transparency, board composition, risk management etc., assigning a number can be challenging as there is an element of subjectivity involved. Using well established frameworks, helps minimize such subjectivity, but does not eliminate it altogether.

We use the G20-OECD Corporate Governance Principles and scored the BSE100 companies focusing on four of the six pillars. These are -

  • Rights and equitable treatment of shareholders
  • Role of stakeholders
  • Disclosures and transparency
  • Responsibilities of the board

The remaining two pillars - Ensuring the basis of an effective corporate governance framework and Developments relating to institutional investors, stock markets, and other intermediaries, are not in the company’s control, so are not relevant to this analysis.

Read our blog here.

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