In an interview with CNBC-TV18, Damodaran emphasised that NRCs must “look around, cast the net wide, and see how this problem can be addressed.”
Damodaran’s remarks come amidst findings from a survey by Excellence Enablers, which revealed that while there has been progress in appointing women as independent directors, executive leadership positions remain largely elusive for women. According to the report, only five companies have women chairpersons, and an equal number have women managing directors, underscoring the slow pace of change at the top echelons of corporate leadership.
Rejecting calls for mandatory quotas, Damodaran stressed the importance of cultivating talent rather than ticking boxes. “I have been consistently against mandatory provisions, whether to bring in women as independent directors or to bring in women as non-independent directors. What happens with mandatory provisions is that some boxes get ticked. You don’t respect the fact that there is value in bringing people of quality to the board,” he explained.
Instead, he recommended measures such as fast-tracking promotions for competent women within organisations and seeking qualified candidates externally. He cautioned that the current ecosystem lacks a sufficient pipeline of women leaders ready for executive board roles and that meaningful change will take time.
Beyond gender representation, Damodaran also addressed the challenges posed by extended board tenures. Highlighting that the average tenure for board members is 13 years, with extreme cases extending up to 51 years, he argued for factoring previous tenures into any regulatory provisions. “If someone has served for two or three decades, they should not start afresh and get another 10-year term,” he noted, warning that such practices stall meaningful boardroom transformation.
Damodaran proposed rotational chair positions to prevent stagnation and encourage innovation. “If you have somebody who chaired a committee for five years, let that person move on. Why have someone chairing the committee for 10 years?” he questioned. Prolonged leadership tenures, he believes, not only hamper fresh thinking but also inhibit the board’s ability to adapt to evolving business landscapes.
Damodaran also weighed in on the contentious issue of CEO and executive remuneration. While opposing excessive regulatory intervention, he called on NRCs to actively ensure fair compensation practices. He urged committees to benchmark pay against peers and align variable pay with performance. “You should not have a very high fixed element and a very small variable element,” he said, emphasising the need to link executive rewards to tangible results. He welcomed shareholder activism on this front, stating, “Shareholders need to protest… Are we overcompensating people who are not delivering adequately?”
The Excellence Enablers survey offers a sobering snapshot of Indian boardrooms. The average age of directors is over 63 years, with a stark underrepresentation of younger voices—only 19 of the 561 independent directors are under 50. This ageing leadership profile, coupled with limited gender diversity, paints a picture of a corporate governance system in need of rejuvenation.
