The website of the Ministry of Corporate Affairs states, “The Board of Directors has to exercise strategic oversight over business operations while directly measuring and rewarding management’s performance. Simultaneously, the board has to ensure compliance with the legal framework, integrity of financial accounting and reporting systems and credibility in the eyes of the stakeholders through proper and timely disclosures.”
Within this, the role of non-executive directors and independent directors have become important and are increasingly gaining more significance.
In terms of skills needed, apart from honing the leadership and technical skills leaders would have used in their corporate careers, there are some emerging new areas that are becoming important for boards to navigate carefully.
Corporate governance remains front and centre in terms of key requirements today. Another such emerging area is environment, social and governance (ESG) requirements. Navigating the guidelines around ecosystem reporting and ensuring both compliance and strategic guidance in the ESG space is an area that will evolve further with further rise of ESG rules and mandates.
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Also, given that many companies are exploring the impact of new technologies on their business functions and with more mainstreaming of artificial intelligence and with rapid digitisation of business processes, the broader strategic context of technology on the business is an important discussion for boardrooms.Indeed, there are organisations today that offer specialised masterclasses and even certifications for people to get the board ready. If you are considering this option and if you need a specific refresher, that could be an option to consider.But, what about the composition of the board? That is another question that often gets asked, specially among women CXOs.
In the 2022-2023 Global Board Diversity Tracker, Egon Zehnder, after analysing 77 companies in India with market cap over 8 billion euros, said that the representation of women in some of the largest companies in India was higher than that in many countries; and 97.4% of the boards had at least 1 woman.
SEBI guidelines and the Companies Act’s guidelines might be the key drivers for this statistic. However, it should not lead to tokenism on behalf of companies.
And the situation is not uniform across various levels of companies. Ernst & Young in its report, “Diversity in the boardroom: progress and way forward”, said while we have made significant progress, the overall percentage of women in boards was still at 18% in 2022.
Vineet Arya, founder of executive hiring firm CoHire, said it was actually a really strong and emerging career option for women in CXO roles.
But there are still many aspects that need to be resolved. The selection process may not always be completely unbiased. The company might want board members to be from the same industry. At times, such decisions get taken just from references. This could lead to obligation and biases, especially when it comes to women in board positions. Unbiased board hiring needs to address these gaps and make it easier for the best senior leaders to find their right board matches.
As such, for boards to really reflect the rich tapestry of talent and skill available and needed for their growth, diversity has a broader definition. And the actions, therefore, need to be seen at the highest levels of the company leadership.