BOARD OF DIRECTORS

Features, Responsibilities and Duties

and specific responsibilities which in each case is separate and distinct from the authority and responsibilities of owners and managers of the business entity. .DEFINITION A board of directors is a group of people elected by the owners of a business entity who have decision-making authority. The precise name for this group of individuals depends on the law under which the business entity is formed. voting authority.

A basic design of existing corporate governance systems Executive directors Owner directors Board of Directors Independent Directors Management Supervisory & enforcement authorities Corporate Shareholders Stakeholders Creditors .

Nominee director appointed by an institution which has invested in or lent to the company shall be deemed to be independent directors.Director whose function is passive in nature.is executive director who is in whole time employment of the company.TYPES OF DIRECTORS  Nominee. . Nominee director are subject to directors responsibilities.  Whole Time.

Defining Director Independence: A ³dependent´ director would be:  An employee of the company or affiliate in past three years  A material business relationship with the company in past 3 years  An executive in another corporation where company¶s executives serve on that firm¶s compensation committee or being a family member of firm or affiliates in past 3 years  Financial literacy and / or accounting experience .

Directors¶ Duties  A Director is to exhibit in the performance of his duties such degree of skill as may be reasonably expected from a person of his knowledge and experience  A Director is to exhibit in the performance of his duties such care as an ordinary man might be expected to take on his own behalf  A Director must act in good faith and in the best interests of the Company .

Directors need to study the information provided to them and call for more information from management if they want it. Directors are responsible for assuring long term survival. The Directors responsibility to ensure long term survival continues. Directors should act in the best interest of the shareholders. Managements may come and go.     .Increased Role of Non-Executive Directors  Directors are now responsible for oversight. internal structures may shift a change.

with a maximum time gap of four months between two successive meetings. with their dates.Mandated CG guidelines and disclosures Board of Directors: frequency of meetings and composition  Board must meet at least four times a year. If the chairman of the Company is a non-executive then one-third of the board should consist of independent directors. must be fully disclosed to shareholders in the annual report of the company.    . and 50% otherwise. The attendance record of all directors in board meetings and board committee meetings must be fully disclosed to shareholders in the annual report of the company. The frequency of board meetings and board committee meetings.

 .Mandated CG guidelines and disclosures Board of Directors: frequency of meetings and composition  Full and detailed remuneration of each director (salary. stock options and perquisites) must be fully disclosed to shareholders in the annual report of the company. sitting fees. Loans given to executive directors are capped (no loans permitted to non-executives). commissions. and must be fully disclosed to shareholders in the annual report of the company.

Recruitment and remuneration of senior officers.Mandated CG guidelines and disclosures Board of Directors: information that must be supplied            Annual. . Transactions involving payment towards goodwill. Foreign currency and other risks and risk management. Any materially significant sale of business and investments. brand equity and intellectual property. Any actual or expected default in financial obligations. hazards. pollution issues and labor problems. Materially important legal notices and claims. half year operating plans. Quarterly results of company and its business segments. Any regulatory non-compliance. budgets and updates. Minutes of the audit committee and other board committees. quarter. Details of joint ventures and collaborations. as well as any accidents.

Important Corporate Committees    Audit Committee Management Committee Remuneration Committee .

the majority of whom are independent.      . Chairman must be an independent director. At least one member must be an expert in finance/accounts. and must be present at the annual shareholders¶ meeting to answer audit or finance related questions. Must have minimum of three members. Must have at least three meetings per year. Must meet with statutory auditors and internal auditors.Mandated CG guidelines and disclosures Board of Directors: Audit Committee  Audit Committee is mandatory. have the powers to seek any financial. legal or operational information from the management. obtain outside legal or professional advice. all non-executive directors. including one before finalization of annual accounts.

    . follow-up and action taken reports. Significant findings. Discussion with internal and statutory auditors about scope and design of audits.Mandated CG guidelines and disclosures Board of Directors: Audit Committee functions  Adequacy of internal audit and internal control systems. Reviewing financial and legal risks and company¶s risk management policies. Examining reasons behind any materially significant default to creditors. suppliers and shareholders. bondholders. through discussion with internal and statutory auditors as well as management.

Mandated CG guidelines and disclosures Board of Directors: Audit Committee functions    Oversight of the company¶s financial reporting process to ensure that the financial statement is correct. sufficient and credible Appointment / removal of external auditor and fixing of audit fees Reviewing with management the annual financial statements before submission to the board. focusing on:  Changes in accounting policies and practices  Major accounting entries  Qualifications in draft audit report  Significant adjustments arising out of audit  The going concern assumption  Compliance with accounting standards. with stock exchange and legal requirements  Any related party transactions .

 Establish a framework of prudent and effective internal controls which enables risk to be assessed and managed. direction to the Management.  Set the company¶s values and standards. and monitor and assess the effectiveness of the internal controls established. and ensure that obligations to shareholders and others are understood and met.  Provide leadership. set strategic aims.MAIN DUTIES OF THE BOARD  The Board must always act in the best interests of the company and shareholders as a whole. .  Review Management performance and determine its remuneration. and ensure that the necessary financial and human resources are in place for the company to meet its objectives.

RESPONSIBILITY OF DIRECTORS  Statutory Responsibility Fiduciary Responsibility  .

Statutory Responsibilities  Section 274 of the Companies Act list out disqualifications of directors. rules and regulations in letter and spirit  Director with other Directors of the Board is responsible that report and recommendation of Audit Committee and Shareholders¶ / Investors¶ Grievance Committee receive due consideration  Director is accountable for the company practicing the highest standard of corporate governance with a underlying view of increasing the shareholders¶ value . Director should conduct himself in such a way that he does not incur such disqualification  Director should maintain absolute secrecy of confidential information  Director should not derive undue personal advantage or benefit by virtue of his position  Director should ensure that company at all times complies with statutes.

. Hospital Products Ltd v United States Surgical Corp [1984] 156 CLR 41 18 .. exercis[ing] a power or discretion which will affect the interests of that other person in a legal or practical sense.Directors as Fiduciaries The critical feature of these relationships is that the fiduciary undertakes .. to act for or on behalf of or in the interests of another person in ..

The name of the game for a company in the 21st Century will be conform while it performs.  Parneeta Thakur  Vivek Ahuja .´ .´It is clear that good corporate governance makes good sense..Mervyn King (Chairman: King Report) THANK YOU.

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