NILADRI CHATTERJEE ARPIT CHITRANSH SWAPNIL KUSHWAH

MEANING

Members who jointly oversee the activities of a

company

Direct & supervise company affairs A director can be termed as Director in law. Company Law in India doesnt distinguish between types of directors

Have relevance for corporate governance

TYPES

Shadow Director De facto Director Additional Director Alternate Director Nominee Director Executive Directors Non Executive Directors Independent Directors Lead Independent Director

BOARD STRUCTURE
Unitary In the USA, UK, Commonwealth countries including India Directors are elected by shareholders Headed by chairperson, composes executive and non executive directors Dual In Germany, Austria, Netherlands, etc. Two tiers

Supervisory Management

BOARD SELECTION
Traditionally Now

Plural Voting System Majority Vote Election Procedures

Powers of Board of Directors

Power exercisable only at meetings of the board

The power to authorize buy back securities. Filling of casual vacancies. The power to issue debentures. To invest in companys funds and make loans.

Other Powers prescribed for listed public companies are:

Considering the quarterly, half yearly and annual financial result. Declaring dividend & issuing bonus share. Issuance of securities. Re-issuing the forfeited shares.

Power exercisable(public co.) only with the consent of the company in general meeting.
Power to remit debt due by a director. Power to borrow in excess of capital & reserves of company. Power to contribute to charities.

All other powers, which subject to the provisions of the Act, the co. is authorised to exercise. These might be exercised either at meetings of the board/ passing resolutions/ delegating the same to committees or others.

Duties of the Board of Directors

As per US Law, a director has to perform two sets of duties

Duty of care The director is obliged to exercise adequate diligence in decision making explaining that it has been taken after considering all the alternative ways and means. Duty of Loyalty A director must have uncompromising loyalty to the organization which he must demonstrate through his actions. The decision will be constructed as a business judgement.

Supremacy of The Board of Directors

The Cadbury Repot has established supremacy of the board of directors of an enterprise. The supremacy of the board can be maintained by the professional directors who have to act within the bound of legal and ethical standards. Their duties are: Duty to legitimacy. Duty of care. To maintain independent views & give critical review. Duty of trust. To uphold the primary loyalty of a director. To uphold the values of corporate governance. To own social responsibility. To keep at heart, protection of the interests of the minority owners. To pay attention to task performance and deliver primary roles. To learn, develop and communicate.

Duty of Legitimacy:

A director needs to be fully conversant with the basic legal and other rules/regulations governing corporation.

Duty of care

Directors have got to perform their roles/functions and tasks with full commitment & competence, and are accountable for the same.

To maintain independent views & give critical review

Directors are expected to have the awareness and maturity to make own judgements on giving direction & should select prudent control procedures in the best interest of the company.

Duty of Trust

The law requires the directors to hold their trust all the time. The key role of the directors is related to their long-term fiduciary duty.

To uphold the primary loyalty of a Director

Right from the time appointment, a directors primary duty is to be loyal to the company which has its legal entity..

To uphold the values of Corporate Governance

Transparency to owners in assessment of risks & the decision process. Honesty in all dealings within or without the board. Honesty in dealing within or without the country. Be accountable to the shareholders.

To own Social Responsibility

A significant subject which is controversial and viewed differently by different agencies. The duty is taken as an extension of the duty to uphold the values of corporate governance. In those countries where the law is not strong, the minority shareholders encounter difficult times. Strategic thinking. Policy formulation. Ensuring accountability. Supervising the management.

To keep at heart, protection of the interest of the minority owners To pay attention to the Task Performance & delivering Primary Roles

To Learn, Develop & Communicate

Learning continuously from own actions/decisions in discharge of the duty. Developing & Appraising members of the org. Communicating with the stakeholders.

Tenure Of BOD

1 year till 1980s.

Re-elected in annual meeting of shareholder.

The nominating committee could refuse to re-nominate anytime.

In takeover period the tenure was extended to 3 years.

The board had three classes of directors. Each nominated for re-election at the end of every year. By 1991 51% of the corporations had elected Directors for 3 years.

Roles and Responsibilities

Shareholder

value.

Aligns the interests of

management shareholders

stakeholders

(customers, creditors, suppliers).

Mission and goals. Strategic plans and decisions.

Appoints senior executives . Companys performance by setting objectives,

establish assessing

short-term and long-term strategies. the performance of senior executives.

Counseling senior executives. Compliance/ Due Diligence. Promote legal and ethical conduct throughout the company. Evaluate the performance. Sustainability of the company.

The board and its director should spend more time on:

Strategic Planning. Succession Planning. Meeting key Managers. Visiting Worksites. Discussing opportunity and threats. Reviewing and monitoring Risk Management System.

Role of BOD during M&A (Buying)

Keep it confidential. Understand the deal structure and motivations for pursuing it. Test assumptions about deal value and determine whether to undertake a market check. Select an appropriate negotiator and delineate negotiation parameters. Scrutinize transaction documents. Engage with target company shareholders and proxy advisory firms.

Shark Repellent/ Anti-Takeover Devices (Selling)

Poison Pills. Crown Jewel Strategy. Fair Price Provision. White Knight. Greenmail.

Pac-Mac Device.
Jewish Dentist.