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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Kaveri Pharma Ltd's NRC has framed an evaluation policy. The Board wishes to avoid any perception of bias and asks whether the evaluation itself may be carried out by an independent external agency. What is the position under section 178(2)?

An independent external agency is permitted. Section 178(2) says the evaluation of the Board, its committees and individual directors may be carried out by the Board, by the Nomination and Remuneration Committee or by an independent external agency, with the NRC specifying the manner and reviewing implementation.

  1. APermitted: evaluation may be carried out by the Board, by the NRC or by an independent external agencyCorrect
  2. BNot permitted: only the Board may carry out the evaluation
  3. CPermitted only if the Audit Committee appoints the agency
  4. DNot permitted: only the NRC may carry out the evaluation

Explanation

Section 178(2) states the NRC specifies the manner of evaluation, to be carried out either by the Board, by the NRC or by an independent external agency. So the external agency is an allowed option, and no Audit Committee appointment is required by the text. Options limiting it to the Board alone or NRC alone ignore the stated alternatives.

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