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Corporate Advisory Division
Board Evaluation “Converting Good Boards
into Great Boards”
Pantomath Advisors LLP – A Group entity of Pantomath
Board Evaluation Need..
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High Performing Boards: Core Corporate Drivers 1 Corporate Boards are expected to be more engaged, knowledgeable, effective, dynamic 2 Boards should also exhibit the responsibility they require from the people who work for them 3 Company works for Market, while Board and Management Team works for Company 4 With massive powers and accountability, Board should provide the Company with heroic performance 5 BOARD EVALUATION has the potential to significantly enhance Board effectiveness and strength 6
Pantomath Advisors LLP – A Group entity of Pantomath
Legislative Framework
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• Chapter IX- Accounts of Companies, Sec 134(3)(p) and Rule 8(4) of Company (Accounts) Rules, 2014 : Disclosure of Annual Evaluation in Annual Report
• Chapter XII- Meeting of Board
and its Powers, Sec 178(2) : Role of Nomination and Remuneration Committee in Annual Evaluation
• Schedule IV- Code for
Independent Directors
• Chapter II- Disclosure by Listed Entity, Reg 4(2)(f)(ii)(9): Role of Board in Annual Evaluation
• Chapter IV- Obligations of Listed Entity, Reg 17(10): Evaluation of Independent Directors
• Chapter IV- Obligations of Listed Entity, Reg 25(3& 4): Obligation of Independent Directors
• Schedule II-Part D (A)(2&4):Role of NRC in Annual Evaluation
• Schedule V (C):Disclosure in Corporate Governance Report
The Companies Act, 2013 SEBI (LODR), 2015
Provisions on Board Evaluation Click here
Pantomath Advisors LLP – A Group entity of Pantomath
RAM – Responsibility
Assignment Matrix
Understanding Roles and Responsibilities –
- People
- Process - Practice
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Pantomath Advisors LLP – A Group entity of Pantomath
RAM
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Roles & Responsibilities
Board
NRC
Independent Director
The Companies Act, 2013 SEBI (LODR), 2015
• Section 134(3)(p) : 1. Conduct performance evaluation of
Committee, Directors and of its own. 2. Disclosure in Board Report I, the manner & criteria of Board Evaluation (Applicable to all listed companies and public companies with paid-up share capital of Rs. 25 crores or more )
• Chapter II –Reg 4 - Monitor and Review Board of Directors’ evaluation framework
• Chapter IV- Reg 17(10) - Conduct
performance evaluation of Independent Directors
• Section 178(2) Conduct performance evaluation of every Director
• Chapter IV- Reg 19 (4)- Laying down the criteria for evaluation of performance of Directors / Independent Directors / Committees / Board as a whole. (the same to be disclosed in Annual report under Corporate Governance Section)
• Schedule IV- Code for ID - 1. Review of the performance of Non-Independent Directors, Board, Chairperson 2. Assess the quality, quantity and timeliness of flow of information between Company management and Board
• Chapter IV- Reg 25 (4)-
1. Review of the performance of Non-Independent Directors, Board, Chairperson 2. Assess the quality, quantity and timeliness of flow of information between Company management and Board
Pantomath Advisors LLP – A Group entity of Pantomath
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“ Further Aid by SEBI…
SEBI in order to educate the listed entities and their Board of
Directors about various aspects involved in Board Evaluation process and to improve the overall performance as well as Corporate Governance standards to benefit all stakeholders has provided with a
Guidance Note on Board Evaluation through circular dated January 5, 2017.
The Guidance Note covers all major aspects of Board Evaluation including the following: 1. Subject of Evaluation 2. Process of Evaluation, including laying down objective and criteria of
evaluation 3. Feedback on evaluation 4. Further Action Plan 5. Disclosure to Stakeholders 6. Frequency of Board Evaluation 7. Responsibility of Board Evaluation 8. Review of entire evaluation process SEBI’s key purpose behind this Guidance Note is to help the listed entities to derive best possible benefit of evaluation process.
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Pantomath Advisors LLP – A Group entity of Pantomath
Circular Issued By SEBI
Summary of SEBI Guidance Note on
Board Evaluation –
Dated: January 5, 2017
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Pantomath Advisors LLP – A Group entity of Pantomath
1 Multiple Levels of Evaluation
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Board as a Whole • Directors taken together
Individual Directors & Chairperson Chairperson CEO Independent Directors Non- independent Directors
2 Committees of the Board Audit Committee Nomination and Remuneration Committee Corporate Social Responsibility Committee Stakeholder Relationship Committee Any Other Committee
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Pantomath Advisors LLP – A Group entity of Pantomath
Process of Evaluation
7. Responsibility of Evaluation
1. Identification of Objectives for
evaluation
2. Laying down the Criteria of Evaluation
3. Feedback on Evaluation
4. Further Action Plan
5. Disclosures to Stakeholders
6. Frequency of Board Evaluation
8. Periodical Review
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Pantomath Advisors LLP – A Group entity of Pantomath
Identification of Objectives of Evaluation
General Objectives Objectives specific for all Board evaluations of the entity.
Specific Objectives Objectives specific to the current Board evaluation based on recent events, new issues of concern etc.
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Pantomath Advisors LLP – A Group entity of Pantomath
Indicative Criteria for Board as a whole
Laying down of criteria for Evaluation
Structure of Board
1. Competency of Directors 2. Experience of Directors 3. Mix of Qualifications 4. Diversity in Board 5. Appointment process to Board
Board Meetings
1. Regularity and frequency 2. Agenda 3. Discussions and Dissent 4. Recording of Minutes 5. Dissemination of Information.
Board Functions 1. Roles & Responsibilities 2. Strategy, Performance evaluation 3. Governance & Compliance 4. Stakeholder Value & Responsibility 5. Evaluation of Risk 6. Corporate culture & values
Board and Management 1. Independence of Management 2. Secretarial & Financial Support 3. Succession Plan 4. Professional Development
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Pantomath Advisors LLP – A Group entity of Pantomath
Indicative Criteria
1. Mandate and Composition 2. Committee Effectiveness 3. Committee structure and Meetings 4. Committee Independence 5. Contributions to Board Decisions
1. Qualifications 2. Experience 3. Knowledge and Competency 4. Fulfillment of functions 5. Team Work & Integrity 6. Initiative 7. Availability and attendance 8. Commitment & Contribution
1. Independence 2. Independent views and Judgment
1. Effectiveness of leadership and ability to steer Meetings 2. Impartiality 3. Commitment 4. Ability to keep Stakeholder’s interest in mind
Committee
Individual Directors & Chairperson
Additional Criteria for Independent Directors
Additional Criteria for Chairperson
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Pantomath Advisors LLP – A Group entity of Pantomath
Board Evaluation Methodologies
• A detailed questionnaire circulated to individual Directors, Committees, Board etc. or
• Oral assessment provided by person on interview
Internal Assessment
• A detailed questionnaire circulated to individual Directors, Committees, Board etc. or
• Oral assessment provided by person on interview or
• Combination of both
• External Assessor shouldn't be a Related Party
External Assessment
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Pantomath Advisors LLP – A Group entity of Pantomath
Feedback
Orally by Chairperson / external assessor to : 1. Each Member separately 2. To the entire Board 3. To the Committees
A written assessment to Board, every Member, Committee
The Chairperson has a active role to play in providing feedback to members
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Pantomath Advisors LLP – A Group entity of Pantomath
Further Action Plan
Areas of Improvement including training, skill building etc. as may be required for Board Members
List of actions required detailing:
1. Nature of actions
2. Timeline
3. Person responsible foe implementation
4. Resources required etc
Review of actions within specific time period.
Based on analysis of responses, Board may prepare an action plan on :
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Pantomath Advisors LLP – A Group entity of Pantomath
Further Steps
Disclosure Requirements
- The manner and criteria of evaluation has to be disclosed to Shareholders as
required on SEBI LODR and Companies Act, 2013 - Company may voluntarily for more transparency provide results, action plan of evaluation
Frequency of Board Evaluation
- As per SEBI LODR and Companies Act, 2013, the evaluation has to be done
once in a year - If the Company so desires, may conduct evaluation more frequently
Responsibility
- The responsibility differs depending on subject of evaluation as per SEBI
LODR or Companies Act, 2013 . - On a global basis, the primary role of steering the whole process of Board Evaluation and ensuing its effectiveness in improving the Board efficiency lie on Chairperson
Review
Board Evaluation , being a non static process requires periodical review for
improvement. - The responsibility of such review lies on board of Directors as per SEBI LODR
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Pantomath Advisors LLP – A Group entity of Pantomath
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Our View…..
This Guidance Note brings in further clarity for the corporates to understand the modalities and process of Board Evaluation. The concept of Board Evaluation, under a legal framework, yet is at a nascent stage, though there were corporates which practiced evaluation process even before it was mandated under The Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The SEBI Guidance Note on Board Evaluation helps raise the corporate governance standards and provides structured evaluation process enhancing the performance of the Company as a whole.
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Pantomath Advisors LLP – A Group entity of Pantomath
Effective Board knows the way, goes the way and shows the way !!!!..........
“Grow a leader – grow the
Organization. A Company cannot grow without until
its leaders grow within.”
- John C. Maxwell
Attributes of Effective Board
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Disclaimer All data and information is provided for informational purposes only and is not intended for any factual use. It should not be considered as binding / statutory provisions. Neither Pantomath Capital Advisors nor any of its group company, directors, or employs shall be liable for any of the data or content provided for any actions taken in reliance thereon.
Website: www.pantomathgroup.com
E-mail: [email protected] [email protected]
Online Initiatives: www.smeipo.net | www.dobusinessinindia.in
Landline: (022) 2659 8692/93 Fax: (022) 2659 8690
Corporate Office : Mumbai 108, Madhava Premises, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051
Other Branch Offices at: Ahmedabad I Jaipur I Jamnagar I Surat Bhopal I Borivali I Kolkata I Pune I Rajkot I Vapi
Let’s Take It Forward….
Progress with Values
Annexure- A1 : Main Provisions under Companies Act and SEBI LODR for
Board Evaluation
SEBI Circular dated January 5, 2017
