Kotak Committee Recommendations on Corporate Governance
The Kotak Committee on Corporate Governance, chaired by Uday Kotak and constituted by SEBI in 2017, submitted a landmark report with 81 recommendations covering board composition, audit committee practices, related party transactions, subsidiary governance, and disclosures, most of which were subsequently incorporated into SEBI LODR Regulations.
SEBI constituted the Committee on Corporate Governance in June 2017 under the chairmanship of Uday Kotak, then Executive Vice-Chairman and MD of Kotak Mahindra Bank, in response to growing concerns about board independence, promoter dominance, and inadequate disclosures at Indian listed companies. The committee comprised prominent industrialists, institutional investors, academics, and former regulators, and submitted its final report in October 2017.
The committee's 81 recommendations spanned several dimensions of listed company governance. On board composition, the committee called for a minimum of six directors on the board of listed companies in the top 500 by market capitalisation, with at least one woman independent director. It recommended capping the maximum number of listed entity directorships at seven, and at three for individuals serving as Whole-Time Directors or Executive Directors in a listed company.
Perhaps the most consequential recommendation was the mandatory separation of the posts of Chairperson and Managing Director/CEO for the top 500 listed companies. The committee argued that the concentration of executive and supervisory roles in a single individual — common in family-controlled Indian businesses — undermined independent board oversight. This recommendation was accepted by SEBI in modified form, requiring separation for the top 500 companies by April 2020 (later extended), though implementation compliance has been uneven.
On audit committees, the committee recommended that all related party transactions above a threshold be reviewed and approved by the audit committee, and that the audit committee be empowered to review the accounts of material subsidiaries. The definition of material subsidiaries was tightened, and listed companies were required to have at least one independent director of the parent company on the board of material subsidiaries.
Recommendations on disclosure were wide-ranging: mandatory quarterly disclosure of pledged shares by promoters, enhanced disclosure of group company transactions, and disclosure of utilisation of IPO and rights issue proceeds were among the key ones adopted. The committee also addressed CEO and CFO compensation disclosures, performance evaluation of boards and individual directors, and the structure and functioning of the nomination and remuneration committee.