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STUDY OF RELATIONSHIP BETWEEN BOARD COMMITTEES AND CORPORATE

GOVERNANCE PRACTICES OF INDIAN FIRMS

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 STUDY OF RELATIONSHIP BETWEEN BOARD
COMMITTEES AND CORPORATE GOVERNANCE
PRACTICES OF INDIAN FIRMS
Dr. PANKAJ M MADHANI

ABSTRACT: The study of internal corporate governance mechanisms such as board

committees plays a crucial role in explaining the variation in corporate governance and
disclosure practices across firms. Board committees are fundamental to overall board
performance and effectiveness. The three principal committees of the board are audit committee,
remuneration committee and nomination committee. Such committees with appropriate
monitoring and controlling enhance the performance of the board and ultimately results in
a better corporate governance and disclosure practices. Hence, this research focuses in this
direction and identifies relationship between board committees and corporate governance and
disclosure practices of firms listed in Bombay Stock Exchange (BSE).

KEY WORDS: Corporate Governance, Disclosure Practices, Board Committee, Audit

Committee, Remuneration Committee, Nomination Committee, Independent Director, Clause
49

INTRODUCTION

Corporate governance is the system by which companies are directed and

controlled. The corporate governance structure specifies the distribution of rights
and responsibilities among different participants in the system, such as, the board,
managers, shareholders and other stakeholders, and spells out the rules and
procedures for making decisions on corporate affairs. By doing this, it also provides
the structure through which the company objectives are set, and the means of attaining
those objectives and monitoring performance (OECD, 1999).

Dr. Pankaj M Madhani, BE (Chemical Engg.), LL.B., PGDBM, MS, MBA, Ph.D.
Professor, ICFAI Business School (IBS), Ahmedabad – 380060.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 1

 Thus, corporate governance covers a wide range of measures. Researchers
classify these measures into internal and external mechanism. With internal
corporate governance mechanisms, the ownership structure of the firm, the board
of directors, the auditor and the major committees of the board like audit committee,
remuneration committee and nomination committee acquire special significance. Of
all the external corporate governance mechanisms, the external market and market
competition play a significant role in improving corporate governance. The internal
and external corporate governance mechanisms in turn are shaped by the overall
legal and institutional environments of the country. The three principal committees of
the board are audit committee, remuneration committee and nomination committee.
This research focuses on the study of relationship between board committees and
corporate governance and disclosure practices of firms.

LITERATURE REVIEW

Firm specific determinant of corporate governance are firm size, industry

types, board characteristics such as size, proportion of independent directors,
and board committees, ownership structure, promoters’ shareholding, leverage,
cross-listing and international listing status. Earlier studies on Indian corporate
governance and disclosure practices have focused on industry types (Madhani,
2014b), cross-listing of firms (Madhani, 2014a), nature of firms such as tangible assets
dominated versus intangible assets dominated firms (Madhani, 2015a) and origin
of firms i.e. MNC subsidiaries versus domestic firms (Madhani, 2015b). Hence, this
research study focuses on board characteristics in general and board committees in
particular.

The Board is usually supported in its work by three key committee viz. audit,
remuneration and nomination committee. The work of such committees is essential
to the effective operation of the board. The committees consider in greater depth
and detail, on behalf of the Board, issues relevant to their Terms of Reference, and
report to the Board after every meeting. John and Senbet (1998) report empirical
evidence showing that the presence of monitoring committees (audit, nomination,
and remuneration committees) is positively related to factors associated with the
benefits of monitoring. The basic pillars of the corporate governance are its specialised
committees i.e. audit committee, remuneration committee and nomination committee
(Shukla, 2008).

2 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
 Auditing is one of the most important elements of corporate governance and
all the codes of corporate governance across the world require the listed companies
to form an audit committee. Audit committees are one of the mechanisms which
help the Board of Directors to adopt better corporate governance practices. Such
audit committees in the Board can help alleviate agency problems by reducing
information asymmetry between insiders (managers) and outsiders (Klein, 1998).
An effective audit committee is a leading aspect of a strong corporate governance
system (DeZoort et al., 2002). The board must set up an audit committee in order to
monitor the accounting, reporting and auditing of financial statements. Auditing and
reporting help in solving the agency problem and assists shareholders in monitoring
and controlling the resources of a firm (Saad, 2010).

Earning management, leading to misleading financial statements, is avoided

in firms with audit committees having greater independence (DeFond and Jiambalvo,
1991). Simnett et al., (1993) have emphasised that audit committee can enhance the
effectiveness of both internal and external auditors. McMullen and Raghunandan
(1996) find that diligent audit committees avoid earning mismanagement by the
Boards. It is reported that companies are less likely to experience fraud and other
reporting irregularities when the audit committee is active and independent (Abbott
et al., 2000).

Cadbury report (1992) points out that for an audit committee to be effective, a
majority of the committee members, if not all, should be independent. Independence
is considered important for a Board committee to be an effective monitor (Klein 1998).
Research has pointed out that audit quality is positively related to audit committee
when there are more independent directors in the committee. Klein (2002) shows that
independent audit committees reduce the likelihood of earning management, thus
improving transparency. Adeyemi and Fagbemi (2010) find that increase in Board
independence can enhance the audit quality.

Williamson (1985) suggests that without an independent remuneration

committee, managers will “appear to write their own contracts with one hand and
sign them with the other.” The objective of nominating a committee is to make
recommendations to the board on all board appointments. Hence, it provides an
independent opinion and recommendations for the best candidates to the board.
In the 1990s, the Cadbury Report (Cadbury Committee, 1992) and several research
studies (e.g. Greenbury, 1995; Hampel, 1998) have recommended the appointment
of more independent non-executive directors to corporate boards and their key
committees (i.e. audit, remuneration, and nomination committees) to improve board

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 3

and board committee effectiveness. The stock market’s reaction to the appointment of
independent outside directors is more positive when the director’s selection process
is viewed as relatively independent of Chief Executive Officer (CEO) involvement
(Shivdasani and Yermack, 1999). According to Narasimhan and Jaiswall (2007), the
remuneration committee plays an important role in mitigating agency problem,
which is expected to be high when the family ownership is low or when the non-
family members hold key positions.

In February 2009, the Confederation of Indian Industry (CII) convened CII

task force to recommend ways of further improving corporate governance standards.
Similarly, the Council of the Institute of Company Secretaries of India (ICSI) has also
promulgated a set of recommendations to reform corporate governance in the light of
events at Satyam. In December 2009, based on CII task force and ICSI report, India’s
Ministry of Corporate Affairs also produced a set of voluntary corporate governance
guidelines for companies. Reports of CII, ICSI and Ministry of Corporate Affairs
recommend that the board should select independent directors through a nomination
committee comprising a majority of independent directors including the chairman.
The current Indian laws only require that companies maintain independent audit
committee and do not mandate the creation of independent remuneration and
nomination committee.

Board Committees and Corporate Governance Practices: A Conceptual Framework

Various board committees comprising the board of directors exist to assist the
board perform its role more effectively. Specifically, such committees are increasing
which are viewed to be essential rather than preferable. There are two types of
board committees. One type includes committees that undertake a more strategic
role in terms of advising the board on major business decisions. Examples of such
management support or operating committee are a strategic planning committee,
a project investment committee, corporate governance and ethics committee or a
finance committee.

The other type of board committee is the monitoring or oversight committee,

intended to protect shareholder interests by providing an objective, independent
review of corporate affairs, particularly with respect to the legality, integrity, and
ethical quality of corporate activities. This committee looks after monitoring or
oversight function of the board; composed primarily of outside directors, and include
the audit, remuneration and nomination committees. These committees are seen to
specifically enhance the accountability of the board as they provide independent
4 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
oversight of various board activities (Harrison, 1987). The Cadbury Committee (1992)
has strongly advocated the appointment of oversight committees by the board, noting
that the effectiveness of a board is strengthened by such structures and procedures.
This paper also specifically focuses on the board committees looking after monitoring
or oversight function of the board. Hence, this research specifically considers audit
committee, remuneration committee and nomination committee as they are the pillars
of the good corporate governance practices.

Audit committee’s principal function is to monitor the integrity of the firm’s

financial reports and to manage the board’s relationship with the firm’s external
auditors. Remuneration committee determines and recommend to the board a fair
and responsible remuneration framework for ensuring that the company’s most
senior managers are appropriately rewarded and incentivized for their contribution
to the long-term success of the company. Nomination committee is responsible for
regularly reviewing the composition of the board, taking into account the benefits of
diversity, the breadth of experience and skills required. The committee also makes
recommendations with regard to any changes to board and senior executive succession
planning and provides recommendations to the board as to the appointment and
reappointment of all directors. As shown in framework of Figure 1, these three core
board committees enhance the performance of the board which in turn increases the
corporate governance and disclosure practices of firms.

Better Corporate Governance and

Disclosure Practices

Enhanced Performance

Board

Monitoring and Controlling

Remuneration Nomination
Audit Committee
Committee Committee

Figure 1 Board Committees and Corporate Governance Practices

(Source: Framework developed by author)

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 5

Audit Committee

The audit committee is one of the most important governance mechanisms

that are designed to ensure that a company produces relevant, adequate and
credible information that investors as well as other stakeholders can use to assess the
performance of the company. Audit committee plays a critical role in ensuring the
integrity of financial management of the company and establishes assurance about
the quality and reliability of financial statement and information used by the Board
and by the outside world.

The major task of the audit committee is to ensure that the external auditor
receives all the necessary information that are required to carry out the audit process
independently and effectively and that the functioning of the external auditor is not
subjected to any of the pressures of the inside management. Hence, a major issue with
respect to audit committee is its independence from the management. Accordingly,
most regulators across the countries require the audit committee to comprise only
of independent directors. However, in India, the Clause 49 of the listing agreement
only requires the audit committee to have two-thirds of its members as independent
directors.

There are many responsibilities of an audit committee such as review of the

internal audit department, review of the annual audit plan, review of the annual
reports and the results of the audit, selection and appointment of external auditors,
and review of the internal accounting controls and safeguarding of corporate assets.
Hence, the main objective of the audit committee is to protect the interests of the
shareholders among others. The primary role of the audit committee is one of oversight
and hence it plays an important role in maintaining the reliability of firms’ financial
statements. Hence, audit committees can be a strong monitoring mechanism that
improves the quality of information flow between firm owners (current shareholders
as well as potential shareholders) and managers, especially in the financial reporting
environment where the two have different information levels.

The Clause 49 regulations also require the audit committee to be a minimum

size of three, chaired by an independent director and all the members of the audit
committee shall be financially literate and at least one member shall have accounting
or related financial management expertise. The Company Secretary will be the
secretary to the audit committee. The audit committee has to meet at least 4 times
a year and the gap between two meetings shall not exceed four months. At least
two independent directors have to be present at these meetings. Even with the

6 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
comprehensive guidelines on constituting audit committees, Clause 49 falls short of
the higher standard set by the Naresh Chandra Committee, which has recommended
that the audit committee should consist of only independent directors (Sehgal and
Mulraj, 2008).

Remuneration Committee

The second important pillar of the corporate governance practices is the

remuneration committee, as the remuneration paid to the directors is a sensitive
subject in the corporate governance all over the globe. Shareholders expect the
directors’ remuneration to be sufficient to attract, retain and motive directors of the
quality (in terms of skill, competency and experience) required but not more than
what is necessary for that purpose. Hence, for this purpose the directors’ remuneration
should be linked with their performance and efforts. All the corporate governance
code recommends remuneration committee to establish rigorous and transparent
procedures for developing remuneration policy of the directors. The remuneration
committee has a check on the director’s remuneration and as such according to agency
theory it aligns the goals of the director in the best interest of the firm.

The responsibility of the remuneration committee is to evaluate and

recommend the compensation of the firm’s top management including the CEO. This
committee can implement remuneration plan that helps achieve the firm’s long-term
performance objectives and ensure that the shareholder interests are not subordinated
to management’s short-term interests. An independent remuneration committee can
strengthen corporate boards by controlling the level of CEO compensation.

Nomination Committee

The third pillar of the corporate governance is the nomination committee. The
main function of this committee is to select or give recommendations to the board, the
names of the directors to be appointed or re-appointed in the ensuing annual general
meeting. The nomination committee nominates the directors who are experts and will
perform well in favor of the firm. Thus, it takes steps in the direction to maximize the
wealth of shareholders. The basic philosophy of the nomination committee is to have
an appropriate mixture of skills, experience and objectivity on the Board, and hence
accordingly nominations are required from various stakeholders for maintaining

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 7

everyone’s interest. Almost, all the corporate governance code recommends that a
majority of nomination committee members should be non-executive directors. The
presence of nomination committee on corporate boards guarantees the appointment
of suitable independent directors and in turn, the efficient performance of the board
itself.

The nomination committee serves to assist the board of directors in the

responsibility of nominating directors. Such separation of the board from the process
of nominations is intended to reduce the involvement of other board members,
including the CEO from such nominations. The major benefit of this separation of the
board from the process of nominations is to increase the likelihood that individuals
will be chosen who will be more willing to act as advocates for the shareholders.

Although, audit committee is compulsory as per clause 49, a listed company

is not required to have a nomination committee. However, clause 49, under its non-
mandatory requirements, suggests a remuneration committee for listed companies.

DATA AND METHODOLOGY

Objectives of the Study

1. To measure overall corporate governance and disclosure practices of sample

firms with the help of an appropriate instrument as an evaluation tool.

2. To know that to what extent firms with different board structure in terms
of board committees disclosed through their annual reports by measuring
Corporate Governance and Disclosure (CGD) scores of such firms.

SOURCES OF DATA

For the purpose of study, data of the sample firms collected from the annual
reports of the same for the financial year 2011-12 (for the period ending March 2012
or December 2012 based on the firms’ financial year) have been downloaded from the
CMIE PROWESS database (Version 4.14).

8 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
SAMPLING TECHNIQUE APPLIED

Stratified sampling is used for obtaining data of firms listed in BSE and is
constituent of S&P BSE sectoral indices.

SAMPLING AND DATA COLLECTION

The sample for the study is collected from the firms listed in BSE in the form
of S&P BSE sector indices. Sectoral indices at BSE aim to represent minimum of 90%
of the free-float market capitalisation for sectoral firms from the universe of S&P BSE
500 index. This sector index consists of the firms classified in that particular sector of
the BSE 500 index.

The CGD score of firms is calculated by thoroughly scrutinizing annual report

of sample of firms with the help of instrument developed by Subramanian and Reddy
(2012). Out of sample of 54 firms, 10 firms have only statutory audit committee; while
remaining 44 firms have more than one board committees. Out of these 44 firms, 25
firms have 2 board committees (audit and remuneration) while remaining 19 firms
have 3 major board committees (audit, remuneration and nomination committees)
(Appendix – I).

TABLE 1: Weight of Sample Firms in their Respective Sectoral Indices

No. of Weight in
S. No. S&P BSE Sectoral Indices Firms Index
Studied (Per Cent)
1 S&P BSE IT 6 95
2 S&P BSE Healthcare 6 88
3 S&P BSE Oil & Gas 6 94
4 S&P BSE FMCG 6 91
5 S&P BSE Auto 6 89
6 S&P BSE Power 6 97
7 S&P BSE Capital Goods 6 94
8 S&P BSE Metal 6 82
9 S&P BSE Consumer Durables 6 90
Total Sample Size 54 91

(Source: Calculated from BSE Web Site)

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 9

The Research Instrument: Measurement of Corporate Governance Disclosure Score

The disclosure index provides a reasonable method for measuring the overall
disclosure quality of a firm. Prior research in this area has made extensive use of such
index methodology as a research tool (Marston and Shrives, 1991). Index method
involves the development of an extensive list of disclosure items, which are expected
to be relevant to the users of information.

This research study uses a voluntary disclosure index based on Subramanian

and Reddy (2012) and hand-collect governance and disclosure data for final sample
of 54 firms. In this research study, the CGD score of firms listed in BSE are measured
by doing content analysis of annual report of sample firms. To arrive at the overall
disclosure score for each category, i.e. ownership and board, annual reports of each
firm under study was scrutinized for the presence of specific items under the above
mentioned categories. One point is awarded when information on an item is disclosed
and zero otherwise. All items in the instrument were given equal weight, and the
scores thus arrived at (for each category), with a higher score indicating greater
disclosure. Final corporate governance and disclosure score (Maximum: 67) for each
firm is calculated by adding overall score received in ownership (Maximum: 19) as
well as and board category (Maximum: 48). This instrument was used in prior research
study also (Madhani, 2014c).

RESULTS AND DISCUSSION

In this research study, all the sample firms fulfill the requirements of the
clause-49 i.e. having audit committee with minimum 3 members and 4 minimum
meetings of audit committee per annum. However, all the sample companies are not
having remuneration committee as well as nomination committee as shown in Table
2. Out of 54 firms in sample, 44 firms are having remuneration committee while 19
firms are having remuneration committee as well as nomination committee.

10 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
 TABLE 2: Board Committees Across Sample Firms

95% Confidence
Type CGD Score Mean Std. CV
No. of Std. Interval for Mean
of CGD
Firms Deviation (%) Error Lower Upper
Firms Min. Max. Range Score
Bound Bound
Firms
with
10 13 20 7 16.9 2.685 15.89 .84918 14.9790 18.8210
only
AC

Firms
with
AC 25 15 33 18 24.12 4.186 17.35 .83730 22.3919 25.8481
and
RC
Firms
with
AC,
19 24 47 23 33.15 5.550 16.74 1.27335 30.4827 35.8331
RC
and
NC
All
54 13 47 34 25.96 7.435 28.64 1.01180 23.9336 27.9924
Firms

(Source: calculated by author)

AC: Audit Committee, RC: Remuneration Committee, NC: Nomination Committee , CV: Coefficient of Variation

In order to find out if corporate governance and disclosure scores of firms

with varying number of board committees are significantly different, the following
hypothesis is tested:

H01: There is no significant difference in CGD scores of firms with varying number of board
committees.

The results of Table 2 show that there is a difference between the mean and
standard deviation of CGD scores of firms with varying number of board committees.
Table 1 indicates that the mean CGD score is highest (33.15) for firms with all 3 primary
board committees i.e. audit, remuneration and nomination committee as compared
to other firms with only 1 or 2 board committees. Thus, the firms with all 3 main
board committees are found to have the highest corporate governance disclosure.
This could be attributed to the fact that the firms with all these board committees will
have better monitoring and control capacity to improve board performance.

In order to test the significant differences in the corporate governance and

disclosure across various sectors, one-way ANOVA is used as sample data is found
to have normal distribution. Results presented in Table 3 show that the significance
value is less than 0.05. Therefore at 5% level of significance, the null hypothesis of
equality of means is rejected. Thus, there exists significant difference between the

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 11

average corporate governance and disclosure scores of firms with different number
of board committees.
TABLE 3 Results of Anova Test For Difference Among Firms with Different Board Committees

Hypothesis F Sig.
CGD scores of firms are not significantly
different across firms with varying 46.335 .000
number of board committees.
Source: SPSS 20 output

Several companies in the sample study have constituted board committees to

take care of specific issues related to governance. These companies are going beyond
the mandatory requirement of putting in place an audit committee. As shown in
Table 2, 19 out of the total 54 companies in the sample of this study have constituted
a nomination committee responsible for selecting independent directors.

In order to find out if corporate governance and disclosure scores of firms with
only mandatory board committee (such as audit committee) and firms with more than
mandatory board committees (such as remuneration and nomination committee) are
significantly different, the following hypothesis is tested:

H02: There is no significant difference in CGD scores of firms with only mandatory board
committee and firms with more than mandatory board committee.

In order to test the significant differences in the CGD scores of firms with
only mandatory board committees and firms with more than mandatory board
committees, parametric t-test is used. Group statistics and independent sample test
output is given in Table 4 and Table 5 respectively.
TABLE 4 Firms With Varying Board Committees: Key Statistics

CGD Score
Std.
No. of Std.
Type of Firms Mean Error
Firms Deviation
Min. Max. Range Mean

Firms with only

mandatory board 10 13 20 7 16.9000 2.68535 .84918
committee
Firms with more
than mandatory 44 15 47 32 28.0227 6.57157 .99070
board committee

Total 54 13 47 34 25.9630 7.43516 1.01180

*CV = Coefficient of Variation

(Source: calculated by author)

12 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
 According to Table 4, firms having only mandatory board committee is having
low mean CGD score (16.90) compared to firms with more than stipulated board
committees, as such firms have mean CGD score of 28.02. The results of the parametric
test (Table 5) show that the significance value of p is less than 0.05. Therefore at 5%
level of significance, the null hypothesis of equality of means is rejected. Thus, there
exists significant difference between the CGD scores of firms with only mandatory
board committee and firms with more than mandatory board committees.

TABLE 5: Results of Univariate Test

t Significance
Null Hypothesis
-Value Level

No significant difference in CGD scores of

firms with only mandatory board committee
-8.524 .000
and firms with more than mandatory board
committee

Source: Computed by author with SPSS 20

In order to find out if corporate governance and disclosure scores of firms

with 2 board committees (audit and remuneration committee) and firms with 3
board committees (audit, remuneration and nomination committee) are significantly
different, the following hypothesis is tested:

H03: There is no significant difference in CGD scores of firms with 2 board committees and
firms with 3 board committees.

In order to test the significant differences in the CGD scores of firms with 2
board committees and firms with 3 board committees, parametric t-test was used.
Group statistics and independent sample test output is given in Table 6 and Table 7
respectively.

TABLE 6 Firms With 2 Board Committees Versus 3 Board Committees: Key Statistics

CGD Score Mean Std.

No. of Std.
Type of Firms CGD Error
Firms Min. Max. Range Deviation
Score Mean

Firms with 2 board

committees 25 15 33 18 24.12 4.18649 .83730
(AC and RC)

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 13

 Firms with 3 board
committees 19 24 47 23 33.15 5.55041 1.27335
(AC, RC and NC)
Total 44 15 47 32 28.0227 6.57157 .99070

(Source: calculated by author)

According to Table 6, firms having 2 board committee is having low mean

CGD score (24.12) compared to firms with 3 board committees, as such firms have
mean CGD score of 33.15. The results of the parametric test (Table 7) show that the
significance value of p is less than 0.05. Therefore at 5% level of significance, the null
hypothesis of equality of means is rejected. Thus, there exists significant difference
between the CGD scores of firms with 2 board committees and firms with 3 board
committees.

TABLE 7 Results of Univariate Test

t Significance
Null Hypothesis
-Value Level
No significant difference in CGD scores of firms
with 2 board committees and firms with 3 board -5.930 .000
committees

Source: Computed by author with SPSS 20

Correlation Analysis

To examine the correlation between the dependent and independent variables,

Pearson product moment correlation (r) was computed. A correlation matrix for the
explanatory variable along with dependent variable was constructed and is shown in
Table 8.
TABLE 8: Correlation Matrix of Dependent Variable and Independent Variable

Correlation Matrix
Independent Board
CGD Score
Variable Committee

Board .801*
1
Committee (.000)

CGD Score 1

Note: * indicates significance at 5% level.

(Source: calculated by author)

14 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
 Correlation Matrix shows pair wise correlation coefficients between the CGD
score and board committee (measured in terms of proportion of board committee
compared to maximum board committee). As significance value is <.05 (.000), positive
and strong correlation exist between board committee and CGD score.

SCOPE FOR FURTHER RESEARCH

For an effective board functioning, board committee structure symbolizes its

method of operation, which itself is not readily observable. Most boards are involved
in oversight of strategy and monitoring rather than strategy formulation. The
corporate governance code of most countries also requires a board to have three main
committees: audit, remuneration and nomination. These committees are intended
to protect shareholder interests and looks after monitoring or oversight function of
the board. Hence, this research focuses on this type of board committees. However,
future study may look in to other types of board committees such as strategy related
committees (e.g. finance committee) that undertake a strategic role in terms of advising
the board on major business decisions.

CONCLUSION

This research study seeks to examine how firms with different number of
board committees differ in corporate governance and disclosure practices. Board
committees are fundamental to effective board performance and overall monitoring.
The basic pillars of the corporate governance system are its core board committees.
Hence, firms with more number of board committees will exhibit higher standard
of corporate governance and disclosure practices compared to firms with less
number of board committees. Research study has found that board committees are
m ajor contributor to overall corporate governance and disclosure practices of firms.
In Indian context, this study will help us to understand that apart from statutory
requirement of audit committee there is also a need for remuneration as well as
nomination committees to improve the overall standard of corporate governance.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 15

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Sona Global Management Review | Volume 9 | Issue 3 | May 2015 17

APPENDIX -I

Board Committees Total Board CCD

S. No. Sector Firm
AC RC NC Committee Score
1 Infosys 1 1 1 3 37
2 Wipro 1 1 1 3 47
3 Oracle Financial 1 1 0 2 20
IT
4 HCL 1 1 1 3 34
5 TCS 1 1 1 3 33
6 Mahindra Satyam 1 1 0 2 21
Mahindra &
7 1 1 1 3 30
Mahindra
8 Tata Motors 1 1 1 3 34
9 Auto Cummins 1 0 0 1 13
10 Maruti Suzuki 1 0 0 1 19
11 Bajaj Auto 1 1 1 3 24
12 Hero MotoCorp 1 1 0 2 22
13 L&T 1 1 1 3 31
14 ABB 1 1 0 2 22
15 Capital Siemens 1 1 0 2 28
16 Goods Pipavav Defence 1 1 0 2 21
17 Cropmton Greaves 1 1 0 2 23
18 BHEL 1 1 0 2 24
19 IOC 1 1 0 2 28
20 Bharat Petroleum 1 1 0 2 24
21 Reliance Industries 1 1 1 3 34
Oil & Gas
22 Cairn India 1 1 1 3 30
23 ONGC 1 1 0 2 31
24 GAIL 1 1 0 2 20
25 Tata Power 1 1 1 3 29
Reliance
26 1 1 1 3 30
Infrastructure
27 NTPC 1 1 0 2 28
Power
28 Reliance Power 1 1 1 3 27
29 NHPC 1 1 0 2 29
30 Power Grid 1 1 0 2 25

18 Study of Relationship between Board Committees and Corporate Governance Practices of Indian Firms
 31 Sterlite 1 1 0 2 30
32 Tata Steel 1 1 1 3 32
33 Hindalco Industries 1 0 0 1 20
Metal
34 Coal India 1 1 0 2 24
35 Jindal Steel & Power 1 0 0 1 17
36 JSW Steel 1 1 1 3 35
37 HUL 1 1 0 2 33
38 Colgate 1 0 0 1 15
39 Nestle 1 0 0 1 16
FMCG
40 Godrej Consumer Products 1 1 1 3 36
41 ITC 1 1 1 3 41
42 United Spirits 1 1 0 2 24
43 Videocon Industries 1 1 0 2 18
44 Titan Industries 1 1 1 3 26
45 Consumer TTK Prestige 1 1 0 2 15
46 Durables Gitanjali Gems 1 1 0 2 24
47 Rajesh Exports 1 0 0 1 15
48 Bluestar 1 0 0 1 20
49 Glaxo 1 0 0 1 20
50 Cipla 1 0 0 1 14
51 Lupin 1 1 0 2 24
Healthcare
52 Ranbaxy Laboratories 1 1 0 2 22
53 Dr Reddy 1 1 1 3 40
54 Glenmark Pharmaceuticals 1 1 0 2 23
(Source: calculated by author)

AC: Audit Committee, RC: Remuneration Committee, NC: Nomination Committee

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 19

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