Telecom major Bharti Airtel, pharmaceutical firms Cipla and Dr Reddy’s Laboratories (DRL) were among the top 20 BSE100 companies with strong corporate governance practices, according to a scorecard for 2021 compiled by proxy advisory firm Institutional Investor Advisory Services India (IiAS).

Hindustan Unilever, HDFC, HDFC Bank, HDFC Life, Crompton Greaves Consumer Electricals, ICICI Lombard, ICICI Prudential Life Insurance and Infosys were among others in IiAS’ assessment of Corporate Governance Scores, 2021, of S&P BSE100 index constituents.

The S&P BSE100 constituents account for about 67% of total market capitalisation of companies, and the assessment is a “reasonable representation of market practices”, the proxy advisory firm said.

Kotak Mahindra Bank, Mahindra & Mahindra, Marico, Tata Consumer Products, Tata Motors, Tata Power, Tata Steel, Titan Company and Wipro were the remaining companies in the ‘Leadership’ category. There were 20 companies in the leadership category, against 11 last year and six in 2019.

“In 2021, the continued volatility due to the Covid-19 pandemic has exposed companies to unique circumstances and risks. This report shows that most companies have continued to improve governance practices even through the pandemic years. Boards are responsible for setting the corporate governance agenda, which is why the composition and structure of the board of directors are of critical importance,” IiAS managing director & chief executive officer Amit Tandon said.

The framework of the Indian Corporate Governance Scorecard was developed earlier in 2015 and 2016 jointly by International Finance Corporation, a member of the World Bank Group, BSE and IiAS. The scorecard is based on the widely-accepted G20 and the Organisation for Economic Co-operation and Development principles of corporate governance.

“Our analysis this year also shows that index inclusion may have tacitly factored in the governance quality of companies – companies that have entered the main indices have higher median scores than those that have exited these indices,” IiAS president and chief operating officer Hetal Dalal said.

Median scores rise

The median scores of the BSE100 companies rose marginally to 62 from 61 in the previous year, despite the pandemic, as corporate India kept a steady focus on improving its governance practices. This was also due to better disclosures and enhanced stewardship practices, and is an improvement from the median score of 58 of 2019, it said.

However, governance at public sector undertakings (PSUs) continues to pull down overall median scores.

Several PSUs do not even meet the basic regulatory compliance requirements for board composition. Moreover, the regulation itself has built-in exceptions for several of the disclosure regulations that are otherwise mandated for the remaining listed companies in India. These practices will weigh on the investor attractiveness of the PSUs scheduled for disinvestments, it added.

Investors are watching how corporate India manages its stakeholders, and the focus on Environmental, Social and Governance (ESG) practices has become central to their engagement with companies. Further, investors are becoming more vocal, which is reflected in the increased pushback on shareholder resolutions in recent times, while several resolutions were passed because of the promoters’ vote, despite the dissent, it added.

This is the sixth edition of the Corporate Governances Scores of the S&P BSE100 index constituents.