Investors should focus on a director’s contribution, says Harsh Mariwala

ET Intelligence Group: When a clutch of foreign investors recently voted against the reappointment of Deepak Parekh, one of the senior-most persons in the corporate and financial world, for “over-boarding” — or, presence in boards of more than 6 companies — many, probably including Parekh and his team, were stunned, even outraged. First, corporate India has no law against “over-boarding”; second, does it really make a difference?

But there aren’t many who are on the same boat with Parekh. Among the non-executive chairmen in the list of BSE100 companies — the universe of Indian listed entities that primarily interest the foreign portfolio investors — only Kumar Mangalam Birla and Harsh Mariwala have presence in boards of more than 5 companies.

Do they have to grapple with a similar predicament as Parekh?

Harsh Mariwala (similar to Parekh) is non-executive chairman of Marico and Kaya (both group companies), and is on the boards of L&T Finance Holdings, Zensar Technologies, Aster DM Healthcare, JSW Steel and Thermax. In contrast, Birla is director only on the boards of his group companies.

While Birla declined to respond to queries from ET, Mariwala spelt out his views that possibly echoes the belief among corporates.

“I endorse the view that multiple directorships beyond a reasonable limit may pose challenges to a director in allocating sufficient time to the companies, thus hindering his ability to play an effective role. In light of which the Kotak Committee on corporate governance recommended a limit of seven listed companies for a director to hold positions in and the same has been enforced by Sebi through its recent amendments to the listing regulations. While global views on this differ as they treat a director having more than 5 public directorships as overboarded versus 7 public directorships which is the limit in India, investors need to give due regard to some of the factors like the capability of the individual serving the board, his contribution to the company, the needs of the board on which he serves and the depth and quality of executive leadership, when they (the investors) are insinuated with such views from the proxy firms,” said Mariwala, founder and chairman of Marico.


According to him, the law in India has already put many checks and balances in place to ensure that each director fulfils his fiduciary responsibility.

Birla and Mariwala each serve on boards of nine and seven publicly-listed companies, respectively. FPI holding in companies such as Idea Cellular, Grasim Industries, Ultratech Cement, Hindalco and Marico is more than 20%.

ISS, the global proxy advisory firm, had voted against Parekh’s re-appointment on ‘over-boarding’ concern since he served on boards of more than six listed firms. Explaining the reason for voting against the re-appointment of Parekh, ISS has mentioned in its voting recommendation report: ‘investors may be concerned whether directors are able to fulfil their fiduciary responsibilities when they are serving on a large number of boards, as in this case. While the demands of each board will vary, and the capacity of each person will vary, holding the equivalent of more than six directorships with publicly-listed companies may make it challenging for a director to devote adequate time to the affairs of each company’. None of the chairmen of companies from the S&P 100 and FTSE 100 indices serve on more than four and six listed companies, respectively.

These checks, said Mariwala, take various forms — public disclosure of attendance of directors, limit on his membership in board committees, board evaluation, recommendation of re-appointment based on the outcome of evaluation, succession planning, provisions on disqualification of directors, etc.

“Merely, a number on directorships may not necessarily hinder the capability of a director in fulfilling his duties but one has to evaluate the ends and means of a board before deciding if a person can be boarded or not to be boarded, else, it may go on to deprive a company from retaining a good leadership/independent directorship,” he said.

However, he agrees that corporates should take a cue from this to strengthen their disclosures as regards to matters like appointment or re-appointment of directors for investors as well as proxy advisory firms to take pragmatic views on such matters.

While the global norms consider more than six companies to be over-boarding, the Sebi regulations notified in May this year have a slightly higher threshold for individuals having board memberships in listed firms.

The newly notified Sebi (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 limits the number of directorship of a person to eight listed entities with effect from April 1, 2019 and not more than seven listed entities with effect from April 1, 2020.