We would like to thank the respondents for their overwhelming response to a recent survey conducted by MGC Global Risk Advisory LLP (‘MGC Global’ or ‘our firm’).

About the survey

In what has been an expansive survey that went beyond the substance to the form, our firm had sought to gauge the state of corporate governance in India with reference to the bespoke “MGC Global Governance Barometer” covering boardroom practices, functioning of audit committees, attention to internal audit & risk management, cybersecurity measures, code of conduct, fraud prevention and whistleblowing.

Our analysis was conducted with an outreach to over 60,000 professionals in management and board level roles in various sectors in India, who had provided their responses to 20 specific questions relating to corporate governance practices in their respective organizations. These responses were analyzed by a team of experts at MGC Global; and the results of this analysis have caught the attention of the media with -

1. PTI featuring the same today at (LINK);
2. The Economic Times featuring the same today at (LINK); &
3. Outlook featuring the same today at (LINK).

Highlights of our analysis

The survey-based analysis has shown that Corporate India needs to accelerate the adoption of risk management with nearly 67% of private companies not having a separate risk management function and over 52% not being equipped with formal risk management processes. The other significant highlights of our analysis are summarized in the ensuing bullets.

• 45% of respondents from private companies have confirmed the risk of cronyism, with less than one-third of their board comprising independent directors.
• Women are significantly underrepresented on boards of 96% of private companies and 51% of public companies.
• Shareholder engagement is restricted to annual general meetings in 67% of public companies.
• CEOs, CFOs & HR directors play the roles of ombudsman in 41% of public companies.
• Cyber security has caught the eye of nearly 90% of the boards of public companies and 77% of private companies.
• 62% of public companies have their board selected by nomination committees.

Over 50% of the survey participants were affiliated with companies that reported annual revenues of over INR 1,000 crore.

The survey has shown that ~45% of respondents from private companies have less than one-third of their board comprising of independent directors, which could potentially result in cronyism and impact objectivity in decision-making. On a positive note, three-fourths of private companies have confirmed that they have policies and procedures related to a code of conduct survey and 39% of the respondents from these companies have also stated that the chairperson of their audit committee was appointed to receive regular whistle blowing reports. This shows that while certain best practices for corporate governance are gaining traction in terms of institutionalization, others are evolving and being implemented gradually.

With data theft on the rise and with the advent of data protection regulations such as GDPR, it was encouraging to see that 89% of public companies have policies and procedures relating to cyber security and data protection in place. However, gender equality and enhanced shareholder engagement need further impetus.

The key take aways

The trend of improving governance practices is well recognized and Clause 49, LODR and the Companies Act of 2013 have confirmed the way for Corporate India. There is also a growing realization that it is neither title nor name alone, rather an individual’s ability to facilitate robust and informed challenges with constructive tension that will truly add value to the board. Clearly, the push to institutionalize transparency as a fundamental criterion for governance will raise the bar for all companies, whether public or closely held. This will provide well-governed companies a competitive advantage, with our report serving as a reference guide.

About Allinial Global

Allinial Global (formerly PKF North America) is currently the world's second-largest member-based association (with collective revenues of approximately USD 4.6 billion) that has dedicated itself to the success of independent accounting and consulting firms since its founding in 1969. It currently has member firms in 99 countries, who have over 26,000 professional staff and over 4,000 partners operating from 688 offices across the globe.

Allinial Global provides its member firms with a broad array of resources and support that benefit both its member firms and their clients in the key impact areas of learning and development, human resources, international outreach, technical support, knowledge-sharing platforms through its specialized communities of practice, marketing resources, information technology and best practices in practice management.