SEBI issues guidelines on evaluation of company's board

India Infoline News Service | Mumbai | January 06, 2017 10:44 IST

The Nomination and Remuneration Committee (NRC) would formulate criteria for evaluation of performance of independent directors and the board of directors and that it would carry out evaluation of every director’s performance.

Securities and Exchange Board of India (SEBI) has issued a guidance note on Board evaluation. According to an official release, the Companies Act, 2013 contains broad provisions on Board evaluation such as evaluation of the performance of the Board as a whole, of individual directors (including independent directors and chairperson) and various Committees of the Board.

The provisions also specify responsibilities of various persons and committees for conduct of such evaluation and certain disclosure requirements as a part of the listed entity's corporate governance obligations, it added.

It has been detailed that the Nomination and Remuneration Committee (NRC) would formulate criteria for evaluation of performance of independent directors and the board of directors and that it would carry out evaluation of every director’s performance.

NRC would also determine whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors.

In the meeting of independent directors of the company (without the attendance of non-independent directors and management), such directors would review the performance of non-independent directors and the Board as a whole.

Also, they would review the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors.

The release also stated that "Board evaluation in India is at a nascent stage. It has been brought to SEBI’s notice by market participants that as the number of listed entities in India is very large, many of them may not have much clarity on the process of Board Evaluation".
 

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