Disclaimer - This is an educational exercise and not meant as a recommendation. Please do your own diligence or consult a investment advisor before taking any investment decision.
We have used La Opala as an example to highlight potential governance issues. Similar issues can be found in multiple Indian small-cap firms.
Managements are pivotal for the growth and longevity of firms, and in competitive markets they need to be paid well to retain them. In most small firms in India however the promoters double down as the management, which is where management pay becomes suspect.
La Opala for example pays its management (3 promoters) between 7 to 9 crores a year. To put things in context that's close to 10% of its accounting profit after tax paid as salary and commissions to promoters every year.
The management pay looks even higher when you see it in context of the dividend it pays out. With the exception of the most recent fiscal where they had a spike in dividends paid out, the management pay is between 60-80% of the dividend paid out to the entire firm. Surprisingly many portfolio managers who chastise public sector undertakings for not allocating money well and treating minority investors unfairly quote this firm as a model clean governance.
Boards on a lot of promoter led companies are generally filled up with promoter and family. As these firms grow larger however one would expect more independence in the board, to avoid the kind of issues we saw with management pay above but also to keep a check on other management shenanigans.
La Opala has a 10 member board of which 5 members are independent. Optically a 50%+ independence on the board is a good sign, but lets dig deeper into who these directors are. Genesis Exports is the holding company for LaOpala that holds close to 50% of LaOpala shares and is a publicly listed company on the Calcutta Stock Exchange.
Mr Santanu Ray is an independent director not only on La Opala RG but also on the holding company Genesis Exports.
Things don't stop here - Mr. AC Chakrabortti was an important independent member on the board and had a place on both the audit and nomination committees (he recently stepped down due to old age after serving the firm for the better part of 25 years). His daughter Suparna Chakrabortti  is on the board of Genesis Exports, the holding company.
The extent to which these factors impacts the judgement and decisions of the independent directors is up for debate but it does speak about the depth of relationship the firm has with its independent directors, which in turn could have negative repercussions on their independence.
 La Opala Annual reports
 Genesis Export Annual report
Want to understand more such details on the top firms in India along with a detailed analysis on the drivers of their moats and growth, head over here - GSN Invest++