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

Meera Foods Ltd proposes to appoint Mr Rao as an independent director with ESG expertise. He was a partner in a consulting firm that earned fees from the company, but he left that firm three years ago and has no other connection. Which is the best assessment of his independence, as the board must form an opinion on it?

Mr Rao may qualify as independent, because the professional-relationship bar applies only within a limited look-back period and he left the firm three years ago. The board must still form and record its opinion on his integrity, expertise and independence before the appointment.

  1. AHe cannot be independent, because any past link to the company bars independence permanently
  2. BHe may qualify only if the promoters certify his independence in writing
  3. CHe cannot be independent because he has ESG expertise, which is a form of pecuniary interest
  4. DHe may qualify, as the disqualifying test for such professional links looks at a defined look-back period of the preceding three financial years, and he has been out of the firm for that period; the board must still record its opinion on his integrity, expertise and independenceCorrect

Explanation

The independence criteria bar a person with specified pecuniary or professional relationships only within a limited look-back, such as the preceding three financial years. Since he left the firm three years ago, the bar may not apply, but the board must form and record an opinion on integrity, expertise and experience. Promoter certification does not decide independence, and expertise is not a pecuniary interest.

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