How Indian Companies Adhere To Diversity Requirements Of SEBI

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Who are independent directors?

An independent director is a director of a board of directors who does not have a material or pecuniary relationship with company or related persons, Except sitting fees.

The NASDAQ stock exchange in the US may soon require all companies listed on the bourse,
To include at least one female board member as well as one member from a racial minority group or from the LGBTQ community on their board of directors.
There also are in place diversity requirements from Indian companies and their compliance with these rules.

All public companies which are listed on stock exchanges and companies with either a paid-up capital of Rs 100 crore or annual turnover over Rs 300 crore,
Are required to have at least one woman board member under the Companies Act.
The Securities and Exchange Board of India (Sebi) further requires, since April 1, 2020,
That the top 1000 listed companies by market capitalisation have a woman board member who is also an independent director.

According to data compiled by Institutional Investor Advisory Services (IiAS), 17% of directors in the Nifty 500 companies were women, as of the end of the last fiscal. 44% of Nifty 500 companies having two or more women directors.
The report by IiAS noted that only 3% of Nifty 500 companies had no women
Experts noted that other than some public sector enterprises (PSEs) which have lagged on the appointment of independent directors,
All major companies were in compliance with the diversity requirements.

Except PSUs, there has been a general increase in compliance with regulations mandating gender diversity on the board of directors.
Sebi had become more strict with regulations related to diversity in appointment of directors.
A number of PSEs have also sought exemption from the requirement that,
Any company without a non-executive chairman include at least 50% independent directors on their board of directors,
As the power of appointment of directors for PSEs lies with the nodal ministry in the central government.

A significant number of companies had appointed relatives of promoters as directors to fulfil the requirement of a woman director.
Thus such directors were unlikely to show the level of independence expected from a director.
However large multinational companies were leading the way in following the diversity regulations in letter and spirit,
By appointing qualified independent women directors to their boards.
Should India also make it mandatory to have a member of the LGBTQ community on the board of directors?