Bengaluru, Nov 27 (KNN) About 68 per cent of small and medium enterprises have no independent directors and if not mandatory, 80 per cent of them do not want to appoint independent directors, according to a recent survey.

The survey on corporate governance for selected CFOs spread across India was conducted by Brickwork Finance Academy (BFA), according to a press release.

The survey samples covered companies of varying sizes. About 48 per cent companies had revenue of Rs 10 cr. to Rs 100 cr. About 26 per cent firms reported revenues between Rs 100 cr. to Rs 1000 cr. About 7 per cent had revenues of more than Rs 1000 cr.

The key findings of the BFA survey are that many SMEs are highly promoter driven.  “The survey indicates, almost 60 per cent firms have promoters stake more than 74 per cent. In just 15 per cent of the companies, the promoters held less than 49 per cent.  About 68 per cent companies, with sales between Rs 100 cr. to Rs 1000 cr, have promoters share over 74 per cent. The results thus will be somewhat biased towards the views of promoters.

As far as the composition of board is concerned, more than 43 per cent firms do not have any independent directors, about 10 per cent have one independent director, and about 28 per cent have more than three independent directors. Considering the sample, this implies that the Indian firms have started appointing more and more independent directors, the survey indicates.

Further, it reveals that SMEs do not want independent directors.  While 68 per cent companies with sales over Rs 1000 cr have more than three independent directors, 67 per cent of SMEs with sales of less than Rs 10 cr. have no independent directors, and almost 80 per cent SMEs do not plan to appoint independent directors.

Significantly, while more than 50 per cent CFOs feel that the independent directors are helpful in decision making process, 18 per cent feel that presence of independent directors delays the decision-making and almost one third were unsure.

When asked if they plan to voluntarily increase the number of independent directors, if the regulation did not require any independent directors, almost 41 per cent replied with emphatic ‘No’ and about 24 per cent were not sure. Only one third felt they would try to have more number of independent directors and almost 80 per cent of SMEs do not intend to appoint independent directors, if not mandated by law.

On whether independent directors should take care of minority shareholders’ interests, about 48 per cent said yes, 27 per cent CFOs replied in negative while the rest felt it is not feasible.

The recent Companies Act makes 2 per cent net profit contribution to CSR mandatory for companies. The debate is wide open with some feeling that the government should increase the tax rate by 2 per cent and not get into corporate decisions on CSR. BFA survey finds that 60 per cent corporate India welcomes the mandatory CSR, about 20 per cent do not like the mandatory nature and another 20 per cent are not sure.

When asked if the present regulation was a bit too much, the answers from corporates were mixed.  About 30 per cent felt regulation was too much. Another 30 per cent felt regulation has to be increased, around 40 per cent felt the present level of regulation is appropriate; and 20  per cent of CFO in large corporates of more than Rs 1000 cr. sales felt that regulation is too much.  (KNN Bureau)