Corporate Governance: Board Composition
Let us see what the law says about Board Composition (some of it is common sense too!):
– board should have an optimum mix of Executive and Non-Exec directors
– check all remuneration is checked by the Board and approved by the shareholders
– check whether the Board has met at least 4 times in a year
– committee limit is 10 committees per director
– check the Code of Conduct (check whether posted on the website)
– check whether Annual Report contains a declaration to the effect of compliance affirmation.
Well what i wrote above is the LAW.
Frankly I would look for the following (over and above this):
– is there at least one of the following categories –
a. a self made business man (reasonably successful) who does not care about the fees or the ‘social status’
b. a CA in practice
c. a lawyer in practice
all the 3 should be really independent – not classmates, cousins, friends or neighbors. It means there should have been a selection process.
Ability of at least 2-3 directors to tell the MD – ‘you are talking through your hat’ (or as a friend said ‘pugree’!!), asking the auditor for the working papers of the audit and not just the audit report, ….
If you find such a board please tell me, I am still searching.
Sounds cruel? Hmmmm truth hurts perhaps?
aditya modi
Read an article in ET editorial thursday- board membership is the latest career!
Belief is becoming hope here… search is on
M S PANJWANI
Subra saab,
whatever may be the law, whatever may the regulations…business houses and politicians will always do what they like to do….when tata can talk to some xyz radia….and files petition in sc begging breach of his privacy….what u can say about raja’s and kalmadi’s and lic’s…….its difficult to have access to technical executive to solve your tata broadband internet problem……but some xyz radia can talk to tata directly for hours together…….unbelievable….the whole thing is that ke bhaiya sabse bada rupaiya…….LOL
tejbir
Seems your friend’s MD is a sardar LOL
Coming to your additional tests…
1. In all probability the company’s owner would already be a self made businessman. Anyway, I see from where you are coming when looking for such person on the Board. But mind you, the quality that you seek from person of such status (self made) will in all cases would still be in the making coz per my experience once made, the quality of standing and telling the MD that he is talking through his pugree is lost in vapours
2. CA? Any special liking for the community (if you yourself are not one). I have seldom found any CA firm to his/her stand and so am not sure if qualification of being CA would help
3. lawyer – not sure the kind of value add that (s)he brings
My additional things would be
– alteast 40% of independent directors (as you define them) and a evaluation of them amongst themselves.
– no independent dir to serve more than 3/5 years
– no resolution be adopted if an independent dir with expertise in the area of the resolution is not attending
– granting right of veto to independent dir
– corporate governance audit through independent dirs…if they are not able to handle the same, terminate their directorships