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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

Kaveri Power Ltd is setting up its Stakeholders Relationship Committee. The board proposes Mr. Rao, the whole-time director for finance, as chairperson, with two other directors as members. Which statement is correct under section 178?

The proposal is not acceptable because the chairperson of the Stakeholders Relationship Committee must be a non-executive director under section 178(5). A whole-time director is executive. Other members may be decided by the board, and the Act does not require all of them to be independent.

  1. AAcceptable, since the Act lets the board decide all aspects of composition
  2. BNot acceptable, since the chairperson must be a non-executive directorCorrect
  3. CAcceptable if Mr. Rao is also an independent director
  4. DNot acceptable, since all members must be independent directors

Explanation

Section 178(5) requires the committee to have a chairperson who is a non-executive director; other members are as the board decides. A whole-time director is executive, so he cannot chair. The Act does not require all members to be independent.

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