The Institute of Directors (IOD) hosted yesterday the Corporate Governance Summit in Chennai, India where Tamil Nadu governor Banwarilal Purohit bestowed the professional excellence award on Doha Bank CEO Dr R Seetharaman.
In a special address, Seetharaman said the key areas that require attention after the global financial crisis include remuneration and incentive systems, risk management, the board’s skill and independence, and shareholder engagement.
He said steps must be taken to ensure that remuneration is established through an explicit governance process, and should be considered good practice to give a significant role to non-executive independent board members in the process.
“Effective implementation of risk management requires an enterprise-wide approach rather than treating each business unit individually. It should be considered good practice to involve the board in establishing and overseeing the risk management structure.
“It should be considered good practice that shareholders can nominate board members and have a significant role in their appointment through instruments that take into account the specific features of the ownership structure of a company,” he said.
Seetharaman noted that shareholders have tended to be reactive rather than proactive and seldom challenge boards in sufficient number to make a difference. Basel committee gave focus on board practices, senior management, risk management and controls, compensation, complex or opaque structures, disclosure, and transparency.
Highlighting emerging trends in corporate governance in advanced economies, Seetharaman said in the US market, investors are pushing for improved board quality and view board composition, diversity, and the refreshment process as key elements.
“Investors want to see an increased diversity of thought and experiences to better enable the board to identify risks and improve company performance. There is continued and growing focus in the US on sustainability and climate change across a range of sectors,” he said.
In Europe, Seetharaman said investors will focus on connecting governance to long-term value creation through board oversight of talent management, Environmental, Social and Governance (ESG), and corporate culture. With gender diversity regulations already widely adopted across Europe, Austria has stipulated that public company boards have at least 30 percent women directors, he said.
“The new UK corporate governance code will apply to reporting periods starting from January 1, 2019, although many companies have begun to apply it more quickly. Diversity will continue to be a priority for board attention, including gender and ethnic diversity.
“To make Japan more attractive to global investors, policymakers are increasingly focused on improving board accountability. Given recent scandals in Japan, institutional investors and regulators will continue to pay close attention to the structure of executive compensation. Boards can expect more shareholder interest in sustainability metrics and strategy,” Seetharaman said.
He also spoke on the emerging trends in corporate governance in emerging economies: “In Brazil, there is an ongoing push for more independence within the governance framework. More independent directors are being appointed to boards due to wider capital distribution.
“In India, Kotak committee has given recommendations on composition and role of the board, institution of independent directors, board committees, monitoring group entities and related entities, accounting and auditing matters, disclosures and transparency, and investor participation. Indian capital markets regulator had brought reforms to promote gender parity in the Indian companies,” he said.
Seetharaman said boards should understand if their company plans to use robotics and how this technology might impact the company’s strategy. 
“As the market for drones and drone services grows, the board should understand any opportunities this technology may present for the company’s strategy. The resources for directors about the many intersections of technology, its strategic value, the connection to innovation, the related risks, and the need for new areas such as artificial intelligence and blockchain. On the whole, governance frameworks emphasise on board diversity, digitisation, and sustainable development.”
Related Story