Sebi panel for clarity in board of directors' appointments

MUMBAI: A Sebi panel has proposed increased transparency in the processes for appointment and removal of board of directors. The panel has also said that companies should have better systems for evaluating the performance of directors and should periodically disclose how board members have performed.

Although U K Sinha-led Sebi did not raise any specific issue, the regulator's International Advisory Board said that it has taken note of "the recent developments on corporate governance related issues in India." The Sebi release on IAB came after its two-day meeting in Jaipur ended on Saturday during which there were extensive deliberations on the role of the nomination and remuneration committee (NRC) of the board, role and evaluation of independent directors,and disclosure requirements.

The proposal comes a month after Sebi came out with a 'guidance note' on evaluation of board of directors of listed entity. The IAB members includes some of the former financial sector regulators and academicians from leading business schools. The IAB said that the performance evaluation of each of the board members is a very important element in corporate governance and this process has to go beyond a box-ticking exercise.
"It has to be realized that good corporate governance is about helping the company achieve its objectives, implement its corporate strategy, while keeping the interest of various stakeholders in mind," a Sebi release said. It added that a matrix of expertise may be introduced to make the board diverse, balanced and in tune with the requirements for the effective functioning of the company. Besides the main board the panel suggested that audit companies focus on forward looking risk assessment in addition to "retrospective evaluation".
The IAB said the performance evaluation of board members is a important element in corporate governance and this process has to go beyond a box-ticking exercise.

many companies consider Board / Committee / Directors evaluation process as ritual...separate meeting of independent directors still horrible, because plenty of independent directors are dependent

"The best evaluation is actually an exercise in self evaluation of the company's own performance and effectiveness in terms of its mission, financial returns, strategy, business model and social responsibility," it said. "It would be a good practice if the result of the evaluation of the board as a whole is disclosed to the shareholders," the release said.