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Corporate Governance 3 Faculty-Nalin Pant:nalinsan@hotmail.com
Corporate Governance 3
Faculty-Nalin Pant:nalinsan@hotmail.com
Role of Board of Directors Position of Board of Directors in a company set up
Role of Board of Directors
Position of Board of Directors in a company set up
Share holders (Owners)
Board of Directors
(Agents/Stewards)
Chief Executive & Senior
Managers
Faculty-Nalin Pant:nalinsan@hotmail.com
Role of Board of Directors Composition of Board of Directors Type Description Value Addition Executive
Role of Board of Directors
Composition of Board of Directors
Type
Description
Value Addition
Executive Directors /
Insiders
Active top level
executives or managers
of the company
(Managing Director,
CFO, Key functional
head)
Familiarity and
understanding of
Company’s business and
operations.
Source of information
on day to day
operations.
Related Outsiders
Some relationship with
company, contractual or
otherwise.
Domain expertise of
relevance to the
Company
Company’s lawyer,
technology supplier
Independent Outsiders
No connection with the
company.
Impartial, independent
view and judgment.
Fresh thinking & ideas
Faculty-Nalin Pant:nalinsan@hotmail.com
Role of Board of Directors The primary responsibility of The Board of Directors’ is to
Role of Board of Directors
The primary responsibility of The Board of Directors’ is to act in
the owners’ best interest by formally monitoring and controlling
the company’s top level executives.
Being the apex responsible body Board is to OWN and DRIVE the
activities of the Company.
Board has the power to direct the affairs of the company, punish or
reward managers and to protect shareholders rights and interests.
As a board is not a full time working body, board performs this role
by retaining certain key powers with them and delegating the rest
to executive directors / chief executive and other senior managers.
Faculty-Nalin Pant:nalinsan@hotmail.com
3 types of Roles of Board of Directors Probity Integrity, uprightness and honesty No conflict
3 types of Roles of Board of Directors
Probity
Integrity, uprightness and honesty
No conflict of interest when playing dual role as “Director” and a
role “ in executive capacity”
Disclosure of any evident or potential conflict of interest
Establishing a strong code of conduct for directors and senior
executives
Ensure organization follows business ethics
Following all rules & regulations applicable on company in letter
and spirit.
Transparency
Presenting facts and situations as they are
Timely and accurate disclosure of financial condition, performance,
major and material events and governance of the company etc.
Transparency on managerial remuneration and basis for any
performance linked incentives, share holding etc.
Faculty-Nalin Pant:nalinsan@hotmail.com
3 types of Roles of Board of Directors Accountability Being responsible for the performance of
3 types of Roles of Board of Directors
Accountability
Being responsible for the performance of the company and for
decisions and actions of the board
Safeguarding shareholders’ interests
Guiding setting of corporate vision. mission, objectives and
financial budgets.
Ensuring adherence to vision, mission and achievement of
objectives and financial budgets.
Prudence in strategic decision making
Appointment of able and qualified managers
Guiding the managers
Putting adequate controls in place
Ensuring effectiveness of control systems
Ensuring compliance of all of all rules and regulations
Faculty-Nalin Pant:nalinsan@hotmail.com
Some specific Roles & Activities of Board of Directors Submission of a Management discussion and
Some specific Roles & Activities of Board of Directors
Submission of a Management discussion and analysis report as
part of annual report to shareholders, covering:
◦ Industry structure & development
◦ Opportunities and threats
◦ Segment wise or product wise performance
◦ Outlook
◦ Risks and concerns
◦ Internal control systems and their adequacy
◦ Discussion on financial performance with respect to operational
performance
◦ Material developments in human resources/ industrial relations
to all shareholders
All financial results to be reviewed and approved by a board
committee or board
Recommendation of dividend / bonus (to be approved by
shareholders)
Faculty-Nalin Pant:nalinsan@hotmail.com
Some specific Roles & Activities of Board of Directors Formation and role of Audit committee
Some specific Roles & Activities of Board of Directors
Formation and role of Audit committee of Directors
◦ Review utilization of funds raised in IPO.
◦ Appoint auditors
◦ Approval for appointment of CFO (non mandatory)
◦ Complete oversight of company’s financial reporting process to ensure
that financial statement is correct, sufficient and credible
◦ Review adequacy of internal controls
◦ To review functioning of whistle blower policy (non mandatory)
Formation and role of Remuneration Committee
◦ Formulating remuneration policy
◦ Recommending remuneration / fees to be paid to various board
members
Formation of shareholders / investors grievances committee
Faculty-Nalin Pant:nalinsan@hotmail.com
Some specific Roles & Activities of Board of Directors To review compliance of all laws
Some specific Roles & Activities of Board of Directors
To review compliance of all laws applicable to the company, basis
report prepared by the company
To lay down code of conduct for all the board members and for
senior management of the company. All board members and
senior officers to confirm compliance to code of conduct
Representation on the board of subsidiary companies
To review company’s risk assessment and minimization procedures
Faculty-Nalin Pant:nalinsan@hotmail.com