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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights

Kaveri Foods Ltd's Stakeholders Relationship Committee is chaired by Mr. Rao, the managing director, who is an executive director. The company has more than one thousand security holders. Which statement is correct under Section 178?

The arrangement does not comply. Section 178(5) requires the Stakeholders Relationship Committee to have a non-executive director as its chairperson, with other members decided by the Board. A managing director is an executive director, so he cannot chair this committee.

  1. AThe chairperson must be a non-executive director, so the arrangement does not complyCorrect
  2. BThe arrangement complies because the Board may choose any director as chairperson
  3. CThe arrangement complies if the managing director is also an independent director
  4. DThe arrangement complies because only the Audit Committee needs a non-executive chairperson

Explanation

Section 178(5) requires the Stakeholders Relationship Committee to have a chairperson who is a non-executive director; other members are decided by the Board. A managing director is an executive director, so the chairing fails the requirement. The Board's discretion extends only to other members.

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