CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights
Kaveri Foods Ltd is constituting its Stakeholders Relationship Committee. The board proposes that Mr. Rao, the managing director, should chair it, with two other directors as members. Is this proposal valid?
The proposal is invalid. Section 178(5) requires the Stakeholders Relationship Committee chairperson to be a non-executive director, and a managing director is an executive director. The other members can be decided by the board and need not all be independent.
- AValid, as the board may choose any director as chairperson
- BValid, provided the managing director is also an independent director
- CInvalid, because the chairperson must be a non-executive directorCorrect
- DInvalid, because all members must be independent directors
Explanation
Under section 178(5), the committee has a chairperson who is a non-executive director, and other members are decided by the board. A managing director is an executive director, so he cannot chair it. The Act does not require all members to be independent.
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