Comparative analysis of composition of board of directors of

IT services v Traditional Indian Companies

Corporate Governance

Submitted to: Prof.R.M.Gadgil

Section C

Submitted by : Group G
Nikhil Singh:2014177
Nikita Tiwari:2014178
Nikunj Gulati:2014179
Nilesh Thakur:2014180
Nishant Agrawal:2014181
Nishant Raghuwanshi:2014182

Contents
Types of directors and rules pertaining to them according to Indian Companies Act
2013........................................................................................................................... 3
Comparative analysis................................................................................................. 4
IT SERVICES............................................................................................................. 4
TRADITIONAL INDIAN COMPANIES...........................................................................4
Comparison with respect to Executive Directors........................................................5
Comparison with respect to Independent Directors....................................................5
Comparison with respect to Non-Executive - Non Independent Directors..................6
Comparison with respect to Size of the Board............................................................6
References.................................................................................................................. 7

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Types of directors and rules pertaining to them

according to Indian Companies Act 2013
1. Executive director - An Executive Director can be either a Whole-time Director of the
company (i.e., one who devotes his whole time of working hours to the company and has a
significant personal interest in the company as his source of income), or a Managing Director
(i.e., one who is employed by the company as such and has substantial powers of management
over the affairs of the company subject to the superintendence, direction and control of the
Board).
2. Non-executive non independent director-A non-executive director (NED, also NXD) or
outside director is a member of the board of directors of a company who does not form part of
the executive management team. He or she is not an employee of the company or affiliated with
it in any other way. They are differentiated from inside directors, who are members of the board
also serving as executive managers of the company.
3. Independent director - Per section 149(6) an independent director in relation to a company,
means a director other than a Managing Director, Whole Time Director Or Nominee Director.
Companies which have to appoint Independent Director:- As per Rule 4 of Companies
(Appointment and Qualification of Directors) Rules,2013the following class of companies have
to appoint atleast two independent directors:A} Public Companies having paid up Share Capital-Rs.10 Crores or More;
B} Public Companies having Turnover- Rs.100 Crores or More;
C} Public Companies have total outstanding loans, debenture and deposits of Rs. 50 Crores or
More.
4. Woman Director - As per Section 149 (1) (a) second provison requires certain categories of
companies to have At Least One Woman director on the board. Such companies are any listed
company, and any public company having:Paid Up Capital of Rs. 100 crore or more, or Turnover
of Rs. 300 crore or more.
Clause 49 of corporate governance in regards to composition of board:
The Board of directors of the company shall have an optimum combination of executive and
non-executive directors with not less than fifty percent of the board of directors comprising
of non-executive directors.
Where the Chairman of the Board is a non-executive director, at least one-third of the Board
should comprise of independent directors and in case he is an executive director, at least half of
the Board should comprise of independent directors. Provided that where the non-executive
Chairman is a promoter of the company or is related to any promoter or person occupying

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management positions at the Board level or at one level below the Board, at least one-half of the
Board of the company shall consist of independent directors.

Comparative analysis
IT service companies are generally differentiated from traditional Indian companies on the basis
that the traditional Indian companies are usually family owned type of businesses.
For the analysis purpose we have taken companies from IT and traditional Indian companies to
find out the major differences between the compositions of board of directors.
The IT companies that we have taken for our comparative analysis are- Wipro, TCS, Cyient,
Infosys, HCL Technologies, HCL Infosystems, Mind Tree, Persistent Voice, Tech Mahindra,
Oracle Financial Services and
The traditional Indian companies that we have taken for comparative analysis are- Aditya Birla,
Godrej, Kirloskar, Mahindra &Mahindra, Dabur , Bajaj Auto, Reliance Industries, Tata Steel.

IT SERVICES

When the chairman is non-executive all the companies except HCL Infosystems have
one-third of their directors as independent.
When the chairman is executive it is found that the companies except Oracle Financial
Services have followed the norm of keeping the half directors as independent.
Regarding one woman director all the companies that we have considered are following
the norm.

This implies that the companies providing IT Services are found be complying with the
clause 49 rules except HCL Infosystems & Oracle.

TRADITIONAL INDIAN COMPANIES

From the analysis it was found that the chairman in most of the traditional Indian
companies are executive in nature or the promoter himself is chairman, because they are
usually owned by the promoters or the founders of the company and
It is found that indeed half of the directors are independent in nature and when the
chairman is non-executive one-third of the directors are independent in nature, which is
as per the rules.
As far as the rules regarding woman director is concerned all the sample companies have
at least 1 woman director.
Also these companies have more Non-Independent: Non-Executive directors.

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It can be concluded that the traditional companies very well comply with the clause 49
rules.

Comparison with respect to Executive Directors

% of Executive Directors

(Traditional Directors)

40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

Percentage of Executive Directors

(IT Companies)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

As far as composition of Executive Directors are concerned, no major difference can be noticed.

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Comparison with respect to Independent Directors

Percentage of Independent Directors

(IT Companies)
33%

50%
60%

18%
50%
55%
20%
0%

40%

75%
80%

67%
70%
60%

100%
80%

% of Independent Directors (Traditional Companies)

Tata Steel

58.33%

Reliance industries

57.14%

Bajaj Auto

56.25%

Dabur
Mahindra & Mahindra

50.00%
61.54%

Kirloskar industries

50.00%

Godrej

50.00%

Aditya Birla

54.55%

From the analysis it has been observed that the percentage of Independent Directors is more in
the IT companies (56%) as compared to the traditional companies (53%). The reason could be to
make the company more transparent and have people from diverse backgrounds to meet the
requirements of the dynamic IT industry.

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Comparison with respect to Non-Executive - Non

Independent Directors
% of Non-Ex. : Non Independent Directors (Traditional Companies)
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

% of Non-Ex. : Non Independent Directors

(IT Companies)
70%
60%
50%
40%
30%
20%
10%
0%

As far as composition of Non-Executive - Non Independent Directors is concerned, the

traditional companies have more of these (25%) & almost all traditional companies have them.
Whereas the IT companies on an average have 23% of Non-Executive - Non Independent
Directors & companies like Persistent dont have them at all. The reason for this might be in
traditional companies the relatives of the promoter or loyal Ex-employee generally gets the seat
on the board. For ex. Nita Ambani in Reliance Industries.

Comparison with respect to Size of the Board

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Size Of The Board (IT Companies)

Size of The Board
(Tradtional Companies)

0 2 4 6 8 10 12 14 16 18

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12

If we look at the size of the board for the comparison, it is seen that the traditional companies
have a large board as compared to the IT companies. As traditional companies have a large &
diverse business to look after, this might be a probable reason for the large size of the board.

References
1)
2)
3)
4)
5)
6)
7)

http://www.godrej.com/GodrejIndustries/gil-mradi.aspx?id=12&menuid=1093
http://www.kirloskarpumps.com/investors-board-of-directors-sanjay-kirloskar.aspx
http://indianboards.com/files/clause_49.pdf
www.ril.com/OurCompany/Leadership/BoardofDirectors.aspx

http://www.tcs.com/about/corp_facts/board_directors/Pages/default.aspx
http://www.adityabirla.com/about-us/leadership-team
http://www.moneycontrol.com/company-management/tataconsultancyservices/board-ofdirectors/TCS

8) www.dabur.com/Media-Board%20Of%20Directors
9) http://www.dailyexcelsior.com/mindtree-names-girotra-board-directors/
10) http://www.persistent.com/about-persistent/board-of-directors
11) http://www.techmahindra.com/General/leaders.aspx
12) http://www.wipro.com/about-Wipro/Wipro-leadership-team/Wipro-board-of-directors/

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