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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board's Accountability on ESG

Kaveri Power Ltd's Board wants to align its decision-making with the duty of a director to act in the interest of the company, its employees, shareholders, the community and the environment. A director argues the duty is owed only to shareholders. Which response is most consistent with the Companies Act, 2013 position?

The statutory duty of directors under the Companies Act, 2013 covers the company, its employees, shareholders, the community and protection of the environment, not shareholders alone. So the director's argument is incorrect, and the Board's ESG consideration is part of its legal duty.

  1. ACorrect, because directors owe duties only to shareholders
  2. BCorrect, because environment is a matter only for pollution control boards
  3. CIncorrect, because the statutory duty of directors expressly extends to employees, community and protection of the environment along with shareholdersCorrect
  4. DIncorrect, because the duty is owed only to employees

Explanation

The Act's statement of directors' duties requires acting in good faith to promote the company's objects for the benefit of its members as a whole, and in the best interests of the company, its employees, shareholders, community and for protection of the environment. So the shareholder-only view is wrong.

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