CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards
Sahyadri Components Ltd, a listed public company, is framing its board evaluation process. The Managing Director suggests that the Board alone should decide who will evaluate the Board, its committees and individual directors. Under the Companies Act, 2013, which body must specify the manner of effective evaluation of performance of the Board, its committees and individual directors?
The Nomination and Remuneration Committee specifies the manner of evaluating the Board, its committees and individual directors under section 178(2). The evaluation itself may be done by the Board, the NRC or an independent external agency, but the NRC reviews implementation and compliance.
- AThe Audit Committee
- BThe Nomination and Remuneration CommitteeCorrect
- CThe Stakeholders Relationship Committee
- DThe statutory auditor
Explanation
Section 178(2) requires the Nomination and Remuneration Committee to specify the manner for effective evaluation of performance of the Board, its committees and individual directors. The evaluation may be carried out by the Board, by the NRC or by an independent external agency, and the NRC reviews its implementation and compliance. The Audit Committee has no such role under that provision.
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