CORPORATE

GOVERNANCE
What is corporate governance?
• Corporate Governance refers to the structures &
processes for the efficient & proper direction & control of
companies (both private and public) in the interest of all
stakeholders.
• Corporate Governance is the application of best
management practices, compliance of law in true letter
and spirit and adherence to ethical standards for effective
management and distribution of wealth and discharge of
social responsibility for sustainable development of all
stakeholders.
• Corporate governance involves a set of relationships
between a company’s management, its board, its
shareholders and other stakeholders, also the structure
through which objectives of the company are set, and the
means of achieving those objectives and monitoring
performance are determined.
• Promote the efficient use of scarce resources
• Promote the trust of investors
• Good corporate governance has a positive link to
economic development and good corporate performance
• Funds will flow to entities which are seen to have
internationally accepted standards of corporate
governance
Why is it important?

• Better access to external finance.

• Lower costs of capital – interest rates on loans.
• Improved company performance – sustainability.
• Higher firm valuation and share performance.
• Reduced risk of corporate crisis and scandals.
• Proliferation of financial scandals and crisis
• Loss of trust of investors
• Globalization lead to increasing cross-border investment
opportunities but investors may not have knowledge
about the regulatory framework of overseas investees
The Need for Corporate Governance
Pillars of Corporate Governance
1. Accountability.
2. Fairness.
3. Transparency.
4. Independence.
1. Accountability
• Ensure that management is accountable to the Board of
Directors.

• Ensure that the Board of Directors is accountable to

shareholders.
2. Fairness
• Protect Shareholders rights.

• Treat all shareholders including minorities,

equitably.

• Provide effective redress for violations.

3. Transparency

Ensure timely, accurate disclosure on all material

matters, including the financial situation,
performance, ownership and corporate
governance.
4. Independence

• Independent Directors and Advisers i.e. free from

the influence of others.

Elements of Corporate Governance
1. Good Board practices.

2. Control Environment.

3. Transparent Disclosure.

4. Well-defined shareholder rights.

5. Board Commitment.
1. Good Board Practices
• Clearly defined roles and authorities.
• Duties and responsibilities of Directors
understood.
• Board is well structured.
• Appropriate work and mix of skills.
• Appropriate Board procedures.
• Director compensation in line with best practice.
• Board self-evaluation and training conducted.
2. Control Environment
• Internal control procedures.
• Risk management framework present.
• Disaster recovery systems in place.
• Media management techniques in use.
• Business stability procedures in place.
• Independent external auditor conducts audits.
• Independent audit committee established.
• Internal Audit Function.
• Management Information systems established.
• Compliance Function established.
3. Transparent Disclosure
• Financial Information disclosed.
• Non-Financial Information disclosed.

• Financials prepared according to International.

Financial Reporting Standards (IFRS).

• Companies Registry filings up to date.
• High-Quality annual report published.
• Web-based disclosure.
4. Well-Defined Shareholder Rights

• Minority shareholder rights formalized.

• Well-organized shareholder meetings conducted.

• Policy on related party transactions.

• Policy on extraordinary transactions.

• Clearly defined and explicit dividend policy.

5. Board Commitment
• The Board discusses corporate governance issues
and has created a corporate governance committee.
• The company has a corporate governance champion.
• Appropriate resources are committed to corporate
governance initiatives.
• Policies and procedures have been formalized and
distributed to relevant staff.
• A corporate governance code has been developed.
• The company is recognized as a corporate
governance leader.
Organization for Economic
Cooperation and Development (OCED)
Principles of Corporate governance
• Principle Number 1:
Ensuring the basis for an effective corporate
governance framework
• The corporate governance framework should be
developed with a view to its impact on overall
economic performance, market integrity and the
incentives it creates for market participants and the
promotion of transparent and well functioning
markets.
• The legal and regulatory requirements that affect
corporate governance practices should be consistent
with the rule of law, transparent and enforceable.
• The division of responsibilities among different
authorities should be clearly articulated and designed
to serve the public interest.
• Stock market regulation should support effective
corporate governance.
• Cross-border co-operation should be enhanced,
including through bilateral and multilateral
arrangements for exchange of information.
• Principle Number 2

The rights and equitable treatment of shareholders and

key ownership functions.

Basic shareholder rights should include

• secure methods of ownership registration
• convey or transfer shares
• obtain relevant and material information on
• the corporation on a timely and regular basis
• participate and vote in general shareholder meetings
• elect and remove members of the board
• share in the profits of the corporation.
Shareholders should be sufficiently informed
about:
• Amendments to the statutes, or articles of
incorporation or similar governing documents of
the company.
• The authorization of additional shares.
• extraordinary transactions, including the transfer
of all or substantially all assets, that in effect
result in the sale of the company.
Rights of shareholders:

• Shareholders should have the opportunity to participate

effectively and vote in general shareholder meetings
• Shareholders should have the opportunity to ask
questions to the board, including questions relating to the
annual external audit, to place items on the agenda of
general meetings, and to propose resolutions, subject to
reasonable limitations.
• Effective shareholder participation in key corporate
governance decisions, such as the nomination and
election of board members
• Principle Number 3:
Institutional investors, stock markets, and other
intermediaries.
• Institutional investors acting in a fiduciary capacity should
disclose their corporate governance with respect to their
investments, including the procedures.
• The corporate governance framework should require that
advisors, analysts, brokers, rating agencies and others
that provide analysis or advice relevant to decisions by
investors, disclose and minimize conflicts of interest.
• Stock markets should provide fair and efficient price
discovery as a means to help promote effective corporate
governance.
• Principle Number 4:
The role of stakeholders in corporate governance

• The rights of stakeholders that are established by law or

through mutual agreements are to be respected.
• Where stakeholder interests are protected by law,
stakeholders should have the opportunity to obtain
effective redress for violation of their rights.
• Where stakeholders participate in the corporate
governance process, they should have access to relevant,
sufficient and reliable information on a timely and regular
basis.
• Stakeholders, including individual employees and their
representative bodies, should be able to freely
communicate their concerns about illegal or unethical
practices to the board and to the competent public
authorities and their rights should not be compromised for
doing this.
• Principle Number 5
Disclosure and transparency
• Disclosure and transparency includes
1. The financial and operating results of the company.
2. Company objectives and non financial information.
3. Major share ownership, including beneficial owners, and
voting rights.
4. Remuneration of members of the board and key
executives.
5. Related party transactions.
Principle Number 6:
The responsibilities of the board

• Board members should act on a fully informed basis, in

good faith, with due diligence and care, and in the best
interest of the company and the shareholders.

• Where board decisions may affect different shareholder

groups differently, the board should treat all shareholders
fairly.

• The board should apply high ethical standards. It should

take into account the interests of stakeholders.
• Monitoring the effectiveness of the company’s governance
practices and making changes as needed.

• Selecting, compensating, monitoring and, when

necessary, replacing key executives and overseeing
succession planning.

• Ensuring a formal and transparent board nomination and

election process.
Difference between Corporate Governance
and Corporate Management
Corporate Governance System
 31

Corporate Governance Parties

1. Shareholders : those that own the company.

2. Directors : Guardians of the Company’s assets

for the Shareholders.

3. Managers: who use the company’s assets.

Managing the Relationship Between Shareholders, Board
and Management

Board of
Shareholders Management
Directors

Companies Act and other Contract

rules and regulations
• Meaning –
• Governing body (called the board) of an incorporated firm

Corporate
Board
ROLE OF BOARD
Why do Boards matter?
1. Nonprofits are legally required to have boards of
directors
2. Boards are the holders of the fiduciary responsibility of
the organization
3. Boards are required to ensure the delivery of the
mission
4. Boards fulfill the tax-exempt status of the organization
 People often question whether boards matter
because their day-today impact is difficult to observe.
But, when things go wrong, they can become the
center of attention.

“Effective Board should think deeply about the way in

which they carry out their role and the behaviors they
display, not just the structure and process they put in
place” Financial Reporting Council (FRC. UK)
What are the Responsibilities (duties) of the Board of
Directors?
• Duty of Care – paying attention; due diligence
• Duty of Loyalty – put the organization first; no conflict of
interest; no private gain
• Duty of Obedience – Complies with the law and
organizational decisions

Question: What could happen if these three duties are

not followed?
Attributes that contribute to Board effectiveness

• Skills and knowledge: What are the skills that are

needed for the board to effectively execute its
responsibilities?
• Process: What processes are necessary for the board to
both understand and properly oversee the activities of the
organization?
• Information: Is the information received by the board
adequate to support effective oversight and decision-
making?
• Behavior: Does the board’s behavior support and
reinforce strong oversight?
Building Effective Board Governance
• Defining key board roles
• Board Chairman
• Chief Executive Officer
• Board Directors - executive and non-executive
• Putting in place board governance arrangements
• Board committees to support decision process
• Supporting functions to regulate processes
• Board procedures and rules, e.g. conflicts of interest
• Delegated authorities for management
• Ensuring proper oversight and supervision
• Management reporting and public disclosures
• Assurance processes and controls

40
41

The Board of Directors is Pivotal

“The board should exercise compelling and relentless leadership

and should not underestimate the power of leading by example -
evidenced by high levels of visibility and integrity, strong
communications, and demanding expectations. This leadership
should be clear to ALL within the organization, as well as
shareholders (accionistas) and other stakeholders (grupos de interés).”

Boardroom Behaviours
A report prepared for Sir David Walker
by the Institute of Chartered Secretaries and Administrators , UK
June 2009
 42

Board Governance Framework

Shareholders

Information and Communication

Board of Directors
• Achievement of strategic objectives and value creation
• Fulfil responsibilities and duties in law and prescribed functions
Chairman

Key Areas of Responsibility

Board Operations

Board Strategy
Meetings
Corporate Policies & Procedures
Corporate
Secretary Board Governance Instruments
Reporting &
Disclosure Monitoring and Evaluation

Governance Board Committees CEO & Management

System and
Controls Audit Remuneration Other Executive Internal Controls
Committee Committee Committees Committee & Assurance

Combined Assurance Model Source: KPMG

Other Assurance
Internal Audit External Audit Management
Providers
Chairman as Leader of the Board
• Primary role
• Provide overall leadership to the board
• Function
• Principal link between board and CEO/management team
• Responsible for board agenda and work plan
• Work with board committee chairmen
• Involved in selection and induction of new directors
• Counsel individual directors on their performance
• Participate in discussions with investors, key stakeholders

43
CEO as Leader of the Company
• Primary role
• Lead the management team, reporting to the board
• Function
• Work closely with board chairman
• Responsible for performance of management team
• Formulate corporate strategy, annual business plan and budget
• Responsible for corporate and financial objectives
• Formulate major corporate policies
• Ensure continuous improvement in services and products
• Manage relations with investors, major customers, regulators
• Responsible for company’s long-term sustainability

44
Board Structure and Composition
• Balancing executive and non-exec. participation
• Ensuring an effective selection process
• Key personal and professional attributes
• Skills aligned to strategy and business
• Also fill board committee requirements, where appropriate
• Some general guidelines
• Must have time to devote to responsibilities
• Must exercise judgment in best interests of company
• Must be informed about the business and its markets
• Must avoid interest conflicts between personal and business
• Must treat board information confidentially
• Should act objectively and be receptive to other perspectives
• Should prepare adequately for meetings, regular attendance

45
Functions of the board

Outward Providing Strategy Formulation

looking Accountability

Approve and work

through the CEO

Inward Monitoring and Policy Making and

Looking Supervising Revising

Past and present focused Future Focused

BOARD OF DIRECTORS`
 Governance

O
O O
O O

O - executive directors Management

 Governance
N

N
N O
O
O O

O - executive directors
N – non executive
Management
directors
Corporate Governance and
Initial Public Offerings
• Corporate Governance is a principle variable in evaluating
risk / setting discount for IPOs
• Firms reaching the market make significant CG changes
to their board structure and practices to conform to market
expectations
Role of the Board in a Public Company IPO / Listing
Experience
• The Board
• Effectiveness
• Talents and background of board members
• Tying board remuneration closely to performance
• Strategic thinking by the Board
• Managing risk effectively
Role of the Board in Listing - IPO
• Developing a robust audit committee
• Taking corporate social responsibility on board
• Encouraging and active dialogue with shareholders
The Effective Board
• Clear strategy aligned to capabilities
• Vigorous implementation of strategy
• Key performance drivers monitored
• Effective risk management
• Sharp focus on views of the capital market and other key
stakeholders
• Regular evaluation of board performance
What does the market look for in a board member?

• Asks the difficult questions

• Works well with others
• Has industry awareness
• Provides valuable input
• Is available when needed
• Is alert and inquisitive
What does the market look for in a board member?

• Has business knowledge

• Contributes to committee work
• Attends meetings
• Speaks out appropriately at board meetings
• Prepares for meetings
• Makes long-range planning contribution
• Provides overall contribution
Implementing effective strategy and change
programs
• The blueprint for the strategy
• The business case
• The transformation program
• A mobilized organization
• A ‘transformation map’
Benefits of Effective Board Committees
• Assist the board in its decision making
• Brings together non-executives and management
• Allows detailed discussion on management matters
• But, filters out operational issues that remain with management
• And, focuses on strategic decisions required of the board
• Supports board responsibilities in key areas
• Audit, internal controls and risk
• Executive compensation and management appointments
• Governance issues and corporate policies
• Nomination and selection of non-executive directors
• Others, e.g. health, safety, environment, etc.
• Defined terms of reference and limitations
• Generally, no executive powers

85
Instruments to Enhance Effectiveness
• Board Charter setting out procedural rules
• Clarifies leadership roles and core responsibilities
• Reserves matters specifically reserved to board
• Sets management delegations and reporting arrangements
• Comprehensive induction for new directors
• Legal and regulatory obligations
• Financial structure of business, budgets and KPIs
• Understanding of strategic priorities and current status
• Familiarize with business operations, e.g. site visits
• Annual board work plan
• Meetings and budget cycle, annual reporting
• Code of ethics or statement of business principles
• Defines corporate values and conduct of staff and directors

86
Role of Corporate Secretary
Resolves organizational
matters for board meetings
Explains the procedural
Key link between company
requirements of laws, the
and non-executive directors
charter, and by–laws of the
company
Works closely with
Chairman and CEO on
Oversees, conducts
board agenda
induction trainings for
newly elected directors
Arranges the annual
shareholders meeting
Supervises and co- and other special
ordinates board papers & meetings
presentations
Ensures compliance with
Takes the minutes of the board procedures
board meetings

87
Board Role in Financial Oversight
 Duty to maintain proper accounting records
 Periodic reporting of financial position, performance
 Establishing, monitoring proper internal controls
 Ensuring proper external controls and audit
 Skills, knowledge required by directors

88
Board’s Role in Risk Management
 The board should know about and evaluate the:
↳ Most significant risks facing the company
↳ Possible effects on shareowners
↳ Company’s management of a crisis
↳ Importance of stakeholder confidence in the organization
↳ Communications with the investment community

 The board should ensure that:

↳ Sufficient time is devoted to discuss risk strategy
↳ Appropriate levels of awareness exist throughout the company
↳ Risk-management processes work effectively
↳ A clear risk-management policy is published

89
Six Critical Questions for Directors!
• Do I believe I have all the information?
• Have I the necessary skills to make this decision?
• Do I have any conflict in this matter?
• Objectively, is this a rational business decision?
• Can I explain this in a transparent manner?
• Is it a responsible discharge of my duties?

90
 Board Sub-committees
 Preferably comprising non-executive board
members, in the areas of:
– Audit
– Risk Management
– Human Resource
– Credit
– Others
 With well defined objectives, authorities and tenure
 Without indulging in day to day affairs
 Full board to review their performance
91
 Responsibilities of Board
 Setting the:
– Objectives
– Vision and Mission statement
– Strategy & Business Plan
 Providing oversight to ensure achievement
of organizational objectives
- within the legal and regulatory framework
and high business ethics
 Standing accountable to stakeholders
92
 Responsibilities (Contd.)

 Appointing key executives – based on

FPT criteria
 Defining powers and responsibilities of
senior management
 Succession planning for key positions
 Disclosing conflict of interest
 Ensuring disclosure to promote
transparency and market discipline
93
 Responsibilities –
Policy Framework
 Formulating policies :
– Credit
– Investments and Treasury Management
– Human Resources
– Internal Audit and Control
– Compliance
– Risk Management
– Other areas
 Communication and compliance
94
 Responsibilities – Internal Audit

 Creation of separate department of

Internal Audit, with
– Professional Staff
– Full Scope coverage
– Audit Charter & Manual
 Head of Internal Audit reporting to the
board or the Audit Committee
 Appointment and remuneration of Head of
Internal Audit
95
 Responsibilities - MIS
 Ensuring existence of an effective Management
Information System
 For keeping itself abreast with
– Activities
– Operating Performance & financial condition
– Operating environment
– Major Risks
 Evaluating Performance of the management -
based on certain benchmarks
96
 Responsibilities – Board Meetings

 At least quarterly, preferably more

frequently
 Individual Directors to attend at least
half of the meetings in a year
 Information through agenda items in
advance
 Recording minutes of deliberations in
detail
97
 Responsibilities - Others

 Reviewing the effectiveness of

Internal Controls
 Strengthening Risk Management

98
 Responsibilities - Others

 Annual Financial Statements :

- Coverage of Directors’ Report
- Statement on Internal Controls
- Risk Management Framework

99
Quality of Board Chair
• Ability to lead the Board
• Ability to listen to all voices
including dissenting voices
• Ability to manage the meeting and
agenda process & content;
• Candid enough to address
sensitive issues yet respectful and
supportive of the CEO ( the
critical friend)
• Sets the tone for the way the
board operates.
• Ensures individual Board
Member’s accountability for
personal and collective
performance
• Does not usurp Board
responsibility – is inclusive
Courtesy of ActionAidInternational
BOARD EFFECTIVENESS
Board effectiveness
• The effectiveness of a Board strongly correlates to the
quality of its conversations
• Quality of conversation is dependent on;
• Leadership
• Quality and management of agenda
• Quality of information: Management and Committee reports
• Board’s understanding of strategy
• Preparations, planning, involvement
• appropriateness, timeliness,
• quality of members, Passion, Trust, integrity, commitment
• Common purpose and comfort within the Board
Quality & timeliness of Management reports to the Board

• What does the Board

need to know – not what
you think the Board
should know.

• Simple and focused on

the real question/issue

• Generates/ mines the

board value

• Bridging management
action and Board
requirements
Board Decisions
• Well‐informed and high‐quality decision making is a
critical requirement for a board to be effective and does
not happen by accident.

• Flawed decisions can be made with the best of

intentions, with competent individuals believing
passionately that they are making a sound judgment,
when they are not.

• Many of the factors which lead to poor decision making

are predictable and preventable.
• The irony of leadership is that people don’t equip you with
the knowledge to make the right decision, and yet they
expect you to make great decisions and think you’re an
imbecile if you don’t

• The single biggest problem in communication is the

illusion that it has taken place.
Ambition vs Capacity
A danger often faced by boards is
trying to do too much with too
little information or doing too little
with too much information.

Fatick, Senegal Truck Loaded with Peanuts

Image by © Sandro Vannini/CORBIS
ca. 1985-1998
Board members’ behavior
• An effective board should not
necessarily be a comfortable place.
Challenge, as well as teamwork, is an
essential feature.

• All Boards deal with difficult issues and

decisions; it is how they deal with them
that defines whether the relationships
are upheld, trust is built and respect
earned.

• As a Board, what you say or don’t say

has an impact on the final decision and
ultimately the quality of direction given
for mission accomplishment.

• There must be mutual respect between

the Board and Management with
appreciation of the value that each
brings to the success of the
organization.
Effective Governance
Boardroom Leadership
Research shows that these types of nonhuman changes fail more often than
they succeed. That’s because the real problem never was in the process,
system, or structure—it was in Board behavior.

The key to real change lies not in implementing a new process, but in getting
people to hold one another accountable to the process - and that requires
Crucial Conversations skills.
Governance performance VS organization performance
• There is a strong consensus that you cannot separate the two:
inefficiency grows out of inadequate board governance.
Inadequate board governance also creates the conditions that
make embezzlement, misappropriation of funds and self-
dealing possible.

• The case of the domineering executive director/CEO and the

weak board seems to be quite typical across the sector.

• The issue is therefore not whether good governance is a

lynchpin to organizational success but how to get Board
members to govern to ensure institutional performance

(Nonprofit Coordinating Committee of New York)

Shaping Directorial Competence and Board
Effectiveness
Assessing board effectiveness

The effectiveness of the Board depends on a variety of factors, some of

which are:
• Board Structure: its composition, constitution and diversity and that of its
Committees, competencies of the members, Board and Committee charters,
frequency of meetings, procedures;
• Dynamics and Functioning of the Board: annual Board calendar,
information availability, interactions and communication with CEO and senior
executives, Board agenda, cohesiveness and the quality of participation in
Board meetings;
• Business Strategy Governance: Board’s role in company strategy;
• Financial Reporting Process, Internal Audit and Internal Controls: The
integrity and the robustness of the financial and other controls regarding
abusive related party transactions, vigil mechanism and risk management;
• Monitoring Role: Monitoring of policies, strategy implementation and
systems;
• Supporting and Advisory Role;
• The Chairperson’s Role.
FINANCIAL INSTITUTIONS
AND NOMINEE DIRECTOR
 Nominee Director Sec. 161
• the Board may appoint any person as a director
nominated by any institution.
• Such appointed nominee director shall not be
treated as an independent director.
• The institution instead of appointing director on
the board can appoint observer on the board.
• Companies law has not defined the role and
liabilities of observer.
Introduction
• Public sector term lending institutions like IDBI, IFCI, ICICI, etc.
are the largest debt providers of corporates. These institutions
also hold substantial shares in the companies. Thus they have
debt-cum-equity position.
• The practice of nomination of directors by financial institutions
on the boards of the assisted companies has been in existence
for almost a quarter of a century now. By virtue of right retained
in the Loan or Underwriting Agreement, the institutions
nominate their representatives.
• These representatives are either their serving officials or
outside experts drawn from a panel maintained for the purpose.
• Nominee Directors are on the boards of assisted companies to
protect the interest of nominating institution and to generally
see that the companies are run on sound commercial lines.
• Actual nomination is decided keeping in view exposure,
size and complexity)' of the assisted project, track record
of the management, etc. At present, financial institutions
appoint Nominee Directors on the boards of the assisted
companies, if their financial assistance to the company
exceeds Rs. 50 crore or where their shareholdings
exceed 26% of the company's equity. The Nominee
Director may be appointed where the company is facing
major problems which are likely to lead to sickness.
• The right of institutions to have a nominee on the Board of
an assisted company needs to be appreciated in the light
of their substantial stake in the company. An institutional
nominee should also be welcome to ensure good
corporate governance by making the board broad based.
The Government has further observed that Nominee Directors
should be given clearly-identified responsibilities in a few areas
which are important for public policy. The areas to be covered
could be:
• a) Financial performance of the Company.
• b) Payment of dues to the institutions.
• c) Payment of Government dues, including excise and customs
duty, and statutory dues. Where the company feels that a
particular tax demand is unjustified, Nominee Directors should
satisfy themselves about the prima facie reasonableness of the
company's case.
• d) Inter-corporate investment in and loans to or from
associated concerns in which the promotor group has
significant interest.
• e) All transactions in shares.
• f) Expenditure being incurred by the company on management
group.
• g) Policies relating to the award of contracts and purchase and
sale of raw materials, finished goods, machinery etc
• h) The nominating institution would like to ensure that the
tendencies of the companies towards extravagance,
lavish expenditure and diversion of funds are curbed.
• i) The institutions should seek constitution of a small Audit
Sub-Committee of the board of directors. The committee
will make periodic assessment of expenditure incurred by
the assisted company. This will be done in all cases
where the paid-up capital of the company is Rs. 5 crores
or more.
• j) The institutional Nominee Director will invariably be a
member of Audit sub-committees.
Role of nominee director
• Therefore, the nominee appointed by the institutions is
expected to take active interest in the deliberations at the board
level and to see the following:
• 1) The project is implemented within the estimated cost.
• 2) The project proceeds as per the time schedule.
• 3) The project is run on sound commercial principles.
• 4) The project is within policy framework of the Government.
• 5) Need-based information on operating plans is submitted
periodically .
• 6) Periodic feed-back report on performance is obtained fi-om
those in charge of execution.
• 7) Certificate of statutory compliances is submitted and
discussed at the Board meetings.
• 8) The nominee, apart from keeping a vigil on the interest of his
nominating institutions, keep diverse interests attuned to
overall well being of enterprise.
• The ND should make such suggestions as would be
conducive to better management practices, effective
functioning of the board, improvement in productivity,
efficiency and continued growth of the assisted
companies.
• The nominee director is expected to keep himself updated
with the policies and current developments in the industry
and to see that the company is run on sound commercial
lines.
• The effectiveness and success of a nominee director
depends on culture and environment of the concerned
enterprise. The ND is expected to be instrumental in
proper supervision of the assisted company.
Recommendations by Kumarmangalam Birla
Committee to be placed before the board
To play his role effectively and ensure good corporate
governance Nominee Director should insist that certain
information is placed before the board of directors in every
meeting.
• 1. Annual operating plans and budgets and any updates.
• 2. Capital budgets and any updates.
• 3. Quarterly results for the company and its operating
division or business segments.
• 4. Minutes of audit committee meetings.
• 5. The information on recruitment and remuneration of
senior officers just below the board level, including
appointment or removal of Chief Financial Officer and the
Company Secretary.
• 6. Show cause, demand and prosecution notices which
are materially important.
• 7. Fatal or serious accidents, dangerous occurrences, any
material effluent or pollution problems.
• 8. Any material default in financial obligations to and by
the company or substantial non-payment for goods sold
by the company.
• 9. Any issue which involves possible public or product
liability claims of substantial nature, including any
judgment or order which, may have passed
• strictures on the conduct of the company or take an
adverse view regarding another enterprise that can have
negative implications on the company.
• 10. Details of any joint venture or collaboration
agreement.
• 11. Transactions that involve substantial payment towards
goodwill, brand equity, or intellectual property.
• 12. Significant labour problems and their proposed solutions.
Any significant development in Human Resources/industrial
Relations front like signing of wage agreement,
implementation of Voluntary Retirement Scheme, etc.
• 13. Sale of material nature of investments, subsidiaries,
assets, which is not in normal course of business.
• 14. Quarterly details of foreign exchange exposure and the
steps taken by management to limit the risks of adverse
exchange rate movement, if material.
• 15. Non-compliance of any regulatory, statutory nature or
listing requirements and shareholders service such as non-
payment of dividend, delay in the share transfer etc.