Page 24 - Sept-2020-Issue

ARTICLE

corporate governance, technical setting out the skills/expertise/ laid-down process and as such
operations or other disciplines competence of the board of direc- the board of the company by itself
related to the company’s busi- tors specifying: does not identify any such core
ness. Regulation 18 of the Listing skills, expertise or competence.
Regulations mandates that all • the list of core skills/expertise/ It appears that being the first year
members of audit committee shall competencies identified by the of disclosure, the focus of most
be financially literate and at least board of directors as required companies was to somehow sat-
one member shall have account- in the context of its business(es) isfy the disclosure requirements
ing or related financial manage- and sector(s) for it to function rather than making a full-fledged
ment expertise. effectively and those actually system of skill/expertise/compe-
available with the board (w.e.f.
Under Schedule IV of Companies FY ending 31.3.2019); and tency assessment of board and
Act, 2013, it is the duty of inde- directors.
pendent directors to undertake • the names of directors who
appropriate induction and regu- have such skills/ expertise/ suggestive measures with
larly update and refresh their competence (w.e.f. FY ending
skills, knowledge and familiar- 31.3.2020). illustrations
ity with the company. As per re- Considering the absolute impor-
cent amendments to Companies Disclosures by companies tance of Board Skills in guiding
(Appointment and Qualification with regard to skill/ the company towards value cre-
of Directors) Rules, 2014 and competencies/expertise ation for shareholders in today’s
Companies (Accounts) Rules, The concept of Directors Skill/ complex and dynamic business
2014, Board’s report shall contain Competency assessment and environment, and statutory re-
a statement regarding opinion its disclosure to shareholders quirements to disclose list of

of the Board with regard to in- is at a nascent stage in India. core skills of board of directors,
tegrity, expertise and experience Consequent upon SEBI require- following suggestions are made
(including the proficiency) of the ment of disclosing a matrix setting with regard to creating a system
independent directors appointed out the core skills/expertise/com- of skill assessment for effective
during the year and independent petence of the board of directors functioning of board:
directors are required to pass an w.e.f. FY ending 31.3.2019, there
online proficiency self-assess- are broadly general disclosure establishment of Director's
ment test conducted by IICA. by the companies with regard skill/competency/expertise
The Kotak Committee on Corpo- to Board Skills in the first year. assessment framework
rate Governance (constituted by Many companies listed few gen- The following steps may be taken
SEBI) acknowledged that given eral skills/competencies and stat- to establish a robust framework
the collective responsibility and ed that these skills/competencies of director's skill/ competency
the need for the board to make are available with directors. Some assessment:
informed business judgement, companies simply disclosed the • The first step is to identify
a balanced wholesome board skills which should be available overall skills/ competencies/
with complementary skill-sets with the board without specifi- expertise needed by board in
amongst the directors is impera- cally commenting on which skills context of concerned organiza-
tive. A group of individuals with are currently available with di- tion by NRC/ Board taking into
varied skill-sets and experience is rectors whereas some only com- account the nature & size of
critical for providing comprehen- mented about the skills currently company/ industry, complexity
sive guidance and direction to a available with the board for effec- & scale of operations, Board &
company. SEBI, based on recom- tive functioning of the company. Committees structure, specific
mendations of the Committee, Many listed Central Public Sector financial & technical issues the
amended the Listing Regulation Enterprises (CPSEs) have dis- company is facing, capabilities
(w.e.f. 1.4.2019) to provide that closed that being Government of executive management, cur-
corporate governance section of Companies, all directors on their rent business & economic envi-
the annual report of listed entities board are selected and appoint- ronment and future projections
shall contain a chart or a matrix ed by Government as per a well & requirements.

24 KaleidOscope September, 2020