RESPONSIBILITIES OF INDEPENDENT DIRECTORS

Submitted by Group 9

Bhavya Kakkar -145 Jatin Jain - 147 Priyanka Malhotra 183 Vibhu Sharma -186 Karan Batheja- 190 Anusha Gupta -194 Shweta Shridhar -197

Clause 49 of Listing Agreement

The company must agree to comply with the following provisions: Board of Directors Composition of Board

The Board of directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the board of directors comprising of non-executive directors. Where the Chairman of the Board is a non-executive director, at least one-third of the Board should comprise of independent directors and in case he is an executive director, at least half of the Board should comprise of independent directors.

Provided that where the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of

independent director
means a non-executive director of the company who: a. apart from receiving directors remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates which may affect independence of the director; b. is not related to promoters or persons occupying management positions at the board level or at one level below the board; c. has not been an executive of the company in

 is

not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following: the statutory audit firm or the internal audit firm that is associated with the company, and the legal firm(s) and consulting firm(s) that have a material association with the company. is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the director; is not a substantial shareholder of the company i.e. owning two percent or more of the block of voting shares. is not less than 21 years of age

Why are independent directors needed?

Role of owners in electing the Board Protection of minorities Role of other stakeholders in management Board structure and objectivity of the Board System of reporting and accountability Audit and internal control Effective supervision and enforcement by regulators To encourage Sustainable Development of the Company and its stakeholders

Role of an Independent Director

Oversight of company financial reporting process and disclosure of its financial information. Recommending to Board on the appointment, reappointment and if required replacement or removal of statutory auditor and fixation of audit fees. Review with management, the annual financial statements before approval by the board with particular reference to Directors Responsibility Statement, changes in accounting policy, major accounting estimates, audit findings adjustments, compliance with listing and other legal requirements, disclosure of related party transactions and

Review of quarterly financial statements. Review with management, performance of statutory and internal auditors, adequacy of internal control systems, adequacy of internal audit function including their structure, frequency, reporting. Discussing significant finding of internal auditors, including internal investigations made by them into areas of fraud, irregularities or major failures of internal control systems.

Protection of the minority shareholders Discussing with auditors on the scope of the audit. Reviewing reasons for defaults into payments. Statutory compliances Reviewing the whistle blower mechanism. Be prepared to attend. Contribute to and constructively challenge development of company strategy. Review financial statements of subsidiary companies with special attention to investments made by them. risk management and review

Rights & Authorities

Right to attend and vote in every Board Meeting. Right to be appointed on various committees. Right to demand information on every business matter. Right to seek clarifications/justifications. Right to dissent.

Duties & Responsibilities of an Independent Director

Responsibility of Directors

Statutory

Responsibility
Fiduciary

Statutory Responsibilities
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, 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

Fiduciary Duty of Directors

Director should not enter into engagements in which he can have a personal interest conflicting with the interest of the company. Director must display the utmost good faith towards the company in their dealings with it or on its behalf.

Duties & Responsibilities

Duties & Responsibilities

He should furnish information about disclosure of General Notice of directorship, membership of body corporate and other entities in the prescribed form to the company. He should also inform the Company about any change in the details submitted subsequently. He should provide a list of his relatives as defined in the Companies Act and their directorship and interest in other concerns.

The Director shall have fiduciary duty to act in good faith and in the interest of the company. It is the duty of the Independent Director to acquire proper understanding of the business of the Company. He should act only within the powers laid down by the Memorandum of Association and Articles of Association and by applicable law and regulations. He should not be a Director of more than fifteen Companies.

Independent Directors and Vicarious Liability

The Companies Act, 1956 looks at all directors alike. It does not exempt independent directors from any of the duties, liabilities, and responsibilities of the Board. As of the current legal norms, Independent directors face the same liabilities as the executive directors. Section 141 of this Act imposes a vicarious liability on the directors of a company who are prosecuted in respect of dishonor of cheque. The law does not make a distinction between directors who are in charge of the day-to-day affairs of the company and non-executive members attending only the board meetings once in three months. It however does look unreasonable to make such nonexecutive directors liable for the actions and decisions of the company they may not be aware of.

Recommendations

Better Defined Rules The Chair of the Board should be an Independent Director with the roles segregated from that of the CEO Guidelines for legal liability of Independent Directors As long as the Independent directors show due diligence, the law should exempt them from all types of liabilities for the actions of the board or the managing director they may not be aware of. Improved transparency Remuneration of CEOs should be decided by a regulatory body like SEBI based on size of the company or decided by institutional investors holding significant stake in the company. Remove One-Size-fits-all approach Clause 49, which lays down role of the audit committee and role of board disclosure risk management, mentions compliance norms to be independent of the size of the company. This may not necessary yield the desired levels of compliance in India. Better effectiveness Medium term lock-in options (medium term stock options which are convertible only after 4-5 years or simply through contracts for the number of years of stay) for the CEO to prevent the CEO from acting in ways to gain short term gains from unethical governance. Training Program for new Directors In order to have a better clarity on the issues facing the business and the upcoming challenges in the industry, many companies could do more in terms of a formal and tailored induction program(which is a recommendation of the Narayana Murthy Report) for their