Directors
Directors are individuals appointed or elected to board of directors of a company. They are
responsible for governing, directing and supervising the affairs of the company. They act as
fiduciaries (trusted representative) of the shareholders and are expected to perform in the best
interest of the company.
Board of directors
Directors collectively are known as Board of directors.
Types of directors
1. Executive directors
Executive directors are the directors who are also involved in day to day operations of the
company. Also termed as whole time directors they are in full time employment with the
company. As they are involved in full time employment and managerial activities they may have
specific titles as well like managing director, finance director etc.
2. Non Executive directors
Non executive directors are directors who are not involved in day to day operations of the
management of the company and do not hold any executive management position in the
company. The rationale behind appointment of such directors is that they bring independent and
individual voice and perspective to the board. They are also termed as outside directors being
not part of internal management of the company.
3. Independent directors
Independent directors are non executive directors who do not have any material or pecuniary
relationship with the company, its promoters or its management. They are not involved in day to
day management of the company and hence are appointed to provide unbiased, objective and
independent oversight. The main objective is to protect the interest of all the stakeholders,
including minority shareholders. They ensure that policies are framed in the best interest of the
company and do not arise any conflict of interest.
4. Nominee directors
Nominee directors are the directors who are nominated by a majority of shareholders or by
other contractual stakeholders such as banks or institutions to protect and safeguard their
interest. In indian companies, nominee directors by public financial institutions is very prevalent
till recently.
5. Shadow directors
In addition to those who are formally appointed as directors, any person, other than expert
advisor, whose instructions the directors of a company normally comply with ias a shadow
director. In other words, any person who has strong influence over a company's affairs and is
not appointed as a director formally.
6. Additional Directors
The constitution of some companies may allow the board to appoint additional directors till the
ensuing AGM. additional directors are appointed in the AGM in addition to the directors of the
company. powers, responsibilities and duties are at par with other directors.
7. Alternate directors
Alternate directors are the directors who are nominated to act in place of another director in
his/her absence for a maximum of 3 months. The AOA of a company may allow such an
appointment of directors with the agreement of majority of directors. They are not agents or
representatives of absentee directors. Same power prescribed in the law
8. Casual directors
Appointed to fill temporary vacancy in BOD usually due to death, resignation or disqualification
of existing one.
9. Deemed directors
They are not appointed as formal directors but act as directors.
Role and responsibilities
1. Strategic Direction
● Define and approve the company’s vision, mission, and long-term objectives.
● Provide guidance on major plans of action, risk policy, annual budgets, and business
plans.
2. Oversight of Management
● Appoint, evaluate, and, if necessary, remove the CEO/Managing Director and other key
executives.
● Monitor the performance of the management to ensure alignment with set goals.
3. Financial Oversight
● Approve financial statements and ensure financial integrity.
● Oversee financial reporting, budgeting, and audit processes.
● Ensure proper internal control systems are in place.
4. Compliance and Risk Management
● Ensure the company complies with laws, regulations, and ethical standards.
● Identify key business risks and ensure appropriate risk management strategies are in
place.
5. Protecting Shareholders’ Interests
● Act in the best interest of all shareholders, especially minority shareholders.
● Ensure fair and equal treatment of all shareholders.
6. Governance and Policy Framework
● Establish and enforce the company’s governance framework, including codes of
conduct and ethical guidelines.
● Form and oversee board committees like Audit, Remuneration, and CSR committees.
7. Stakeholder Engagement
● Consider the interests of employees, customers, suppliers, creditors, and the
community.
● Promote sustainable and socially responsible business practices.
8. Succession Planning
● Ensure a strong succession plan is in place for key executives and board positions.
Whistleblowing
● Act by an employee, insider or any third party reporting illegal, improper and misconduct
within the organisation
● Whistleblower
● Act may be violation of law, fraud, corruption etc
● Internally as well as externally
● Importance- promotes transparency and accountability, detecting fraud, promotes ethical
conduct
● Process-
1. Identifying misconduct 2. Gathering proofs 3. Reporting 4. Investigation 5. Corrective
steps 6. Protecting whistleblower
● Challenges-
1. Psychological stress 2. Weak laws 3. Fear of retaliation 4. Social isolation 5. Lack of
support from authorities 6. Risk of legal consequences
● Sarbanes act and whistleblower protection act 2014 and whistleblower protection
directive 2019 in europe
Shareholder activism
● Actions by shareholders to influence companies decision
● Importance
1. Elon musk - better CG 2. Exxonmobil- environment friendly ESG 3. Apple - increasing
shareholder’s value 4. Unilever - long term sustainable growth 5. Enron- preventing
frauds 6. General Electric- management accountable 7. India- minority rights
I think every genius uses amazing efforts
● Types-
1. Governance activism 2. Financial activism 3. Social and environmental 4. Legal
Institutional investors
● Please invite everyone around some pizza deliciously
CSR
● Company’s commitment to contribute positively. Encompasses actions taken by biz to
address social, env and economic concerns while balancing various stakeholder
● Relationship- long term focus, transparency and accountability, stakeholder
engagement, ethical leadership and governance, effective oversight of CSR
● CG def
Gandhian trusteeship
● Socio-economic concept that emphasizes equal distribution of wealth and resources in
society. Resources and wealth held by individual and biz should be utilized as if they are
trustees and not owners.
●
Investment committee
● Roles- making investment plan, mitigate risk, monitoring performance, policy guidelines,
reviewing proposals, advising the board
Shareholder grievance committee
● Roles- handling grievances, fast redressal, maintaining transparency, maintaining
reports, compliance with SEBI, reporting to the board, review mechanism. Oversee
services of registrars and tranfer agents
Audit committee
● Roles- overseeing FS and disclosures, whistleblower mechanism, auditor selection and
monitoring, internal control, compliance, RPT, review FS with mngmt before submission
NRC
● Identifying and recommending qualified candidates for board meetings, reviewing and
evaluating board performance and effectiveness, succession planning of directors and
senior management, ensuring board requirements and diversity, determining and
reviewing executive packages, planning performance based incentives, maintain
transparency, make sure to align with long term objectives.
Compliance committee
● Compliance with laws and regulations, compliance with code of conduct of company,
investigation, addressing complaints, educating employees about various laws,
developing rules and procedures
Risk management committee
● Developing risk policy framework, implement, review, internal control, report to board
and advise and recommend, review report on risk of annual report
