A report from the Indian School of Business highlighted the need for Indian corporate boards to go beyond compliance and actively shape company strategies. Currently, only 17% of boards are actively involved in shaping company strategy, with the majority playing a more passive role. The report emphasized the importance of directors moving beyond compliance to anticipate risks and guide management towards long-term value creation.
The study, based on a survey of over 200 directors from BSE 500 companies, assessed governance maturity in areas such as guidance and oversight, board functioning, and leadership. It revealed that a significant number of boards provide limited or no input beyond reviewing management’s plans. Sanjay Kallapur, a Professor of Accounting at ISB, stressed the need for boards to evolve into active stewards of value creation as India’s corporate sector expands globally.
According to the report, only 27% of directors seek information from independent sources, potentially leading to an “echo chamber” effect that stifles dissent and increases the risk of groupthink. Nirmalya Kumar, a Visiting Professor of Strategy at ISB, emphasized the importance of fostering boardrooms that value preparation, perspective, and the courage to ask challenging questions. The report also identified gaps in leadership and committee effectiveness, noting that while audit committees excel in financial vigilance, their focus on whistleblower and behavioral issues remains limited.
