Corporate Governance 3

Faculty-Nalin Pant:nalinsan@hotmail.com

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 Executive Directors / Insiders Description Active top level executives or managers of the company (Managing Director, CFO, Key functional head) Related Outsiders Some relationship with company, contractual or otherwise. Companys lawyer, technology supplier Independent Outsiders No connection with the company. Impartial, independent view and judgment. Fresh thinking & ideas Value Addition Familiarity and understanding of Companys business and operations. Source of information on day to day operations. Domain expertise of relevance to the Company

Faculty-Nalin Pant:nalinsan@hotmail.com

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 companys 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 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 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 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 of Directors
Review utilization of funds raised in IPO. Appoint auditors Approval for appointment of CFO (non mandatory) Complete oversight of companys 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 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 companys risk assessment and minimization procedures

Faculty-Nalin Pant:nalinsan@hotmail.com