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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Conceptual Framework of Corporate Governance

Sagar Foods Ltd's Board has appointed Ms. Iyer as a woman director. The Board argues that, since she is a nominee of the promoter group's holding company, she can be counted as an independent director because she is not an executive. Which view is correct?

She cannot be treated as independent. Independence requires satisfying statutory criteria and giving a declaration, and a promoter-group nominee is linked to the promoter. Merely being non-executive, or obtaining committee approval, does not confer independent director status.

  1. AShe qualifies as independent because she is non-executive
  2. BShe qualifies only if she holds under 5% of the shares personally
  3. CShe cannot be treated as independent merely for being non-executive; independence needs a declaration and absence of pecuniary or promoter-related relationshipsCorrect
  4. DShe qualifies if the Nomination Committee approves her

Explanation

Independence requires meeting statutory criteria and giving a declaration, including not being a promoter or related to promoters or their group. Being a promoter-group nominee disqualifies her from independent status, whatever committee approval exists. Non-executive status alone is not enough.

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