Board independence ratio
Formula
Board independence ratio
Board Independence Ratio (%) = (Number of independent directors ÷ Total number of directors) × 100
Variables
| Number of independent directors | Directors classified as independent under Section 149(6) and LODR Regulation 16 |
| Total number of directors | All directors on the board at the reporting date, executive and non-executive |
Finding the inputs
Both numbers are in the corporate governance report, in the table of board composition. Check the reporting date, because directors who joined or left during the year are listed separately.
Reading the number
Compare the ratio with the legal minimum that applies to the company. If the chair is a non-executive director with no promoter link, at least one-third of the board must be independent. If the chair is an executive director, or a promoter or related to one, at least half must be independent. A ratio well above the minimum is a mild positive sign, but it does not prove real independence. Read it alongside tenure, attendance and committee roles.
Illustrative example
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