Committees of the BOARD
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Transcript of Committees of the BOARD
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Session 10Date 1st March, 2013
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Board relies on independent outside
directors to monitor management
performance.
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Audit Committee
Remuneration Committee
Nomination Committee
Strategy Committee
Risk Management Committee
Management committee
Finance committeeScience committee
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Oversight of the finance function and
monitoring
Relies on the senior financial management
and the outside auditors.
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A qualifies and independent audit
committee should be set up by the board
of a Company. This would go a long way in
enhancing the credibility of the financial
disclosures of a Company and promoting
transparency
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Minimum of 3 members ( non executivedirectors, majority being independent and with atleast one director having financial and
accounting knowledge) The chairman of the committee should be anindependent director.
The Chairman should be present at AGM toanswer shareholder queries.
The Company Secretary should act as theSecretary to the Committee
( the above are mandatory recommendations)
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Committees are the link between the board
and external auditors
This committee looks into all the matters
raised by external auditors relating to
management systems and tries to resolve
any obligations that the auditors raise
about the published financial accounts
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To discuss with independent directors anyproblem that they experience in completingthe audit
To review the interim and final accounts intoto.To inform the board about the effectiveness
of:
Internal controls and quality of financial reporting aspointed out by independent directors
To make recommendations regarding the audit fee,selection and replacement of auditors.
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Reviewing with management the annual
financial statements before submission to
the board
Reviewing the adequacy of internal audit
function, including structure of internal
audit department, staffing and seniority of
the official heading department, reportingstructure, coverage and frequency of
internal audit.
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Discussion with internal auditors of any
significant findings and follow- up thereon
Reviewing the findings of any internal
auditors into matters where there is
suspected fraud or irregularity or a failure
of internal control systems of a material
nature and reporting the matter to theboard
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Discussion with the external auditors beforethe audit commences , of the nature andscope of audit . Also post-audit discussion to
ascertain any area of concernReviewing the companys financial and risk
management policiesLooking into reasons for substantial defaults
in the payments to the depositors, debentureholders, shareholder and creditors
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Meet at least thrice a year
One meeting before finalization and one
every 6 months
Quorum should be either 2 members or
1/3rd of the members of the audit
committee whichever is higher and there
should be a minimum of two independentdirectors.
( this is a mandatory recommendation
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To investigate any activity within its terms
of reference
To seek information from any employee
To obtain outside legal or other
professional advice
To secure services of outsiders with
relevant expertise( this is a mandatory recommendation)
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Shareholders are more concerned about
the lack of transparency regarding
remuneration of directors and top level
managers
The boards set ups the committee to
objectively review the package of the
directors and top level mangers
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The Board of Directors should decide the remunerationof the non-executive
The annual report must contain :- all elements of the remuneration
package of all the directors- Details of fixed component andperformance linked incentives
- Service contracts, notice period, severancefees
- Stock option details, if any
( this is a mandatory recommendation)
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It chalks out remuneration policy ( checks
out unreasonable increase in executive
compensation.
Designs a transparent remuneration policy
that can attract and retain directors and top
management and motivate them to
achieve the long-term goals of theorganization.
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To select the non-executive directors.
Generally, it is headed by the chairman
and it shortlists and interviews the final
candidates.
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Risk refers to the uncertainty that surroundsfuture events and outcomes. It is theexpression of the likelihood and impact of anevent with the potential to influence the
achievement of an organization's objectives.
Risk Management is a systematic approachto setting the best course of action under
uncertainty by identifying, assessing,understanding, acting on and communicatingrisk issues
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Setting the tone from the top that systematicand integrated risk management is valuablefor understanding uncertainty in decision-making and for demonstrating accountability
to stakeholders;
determining the best way to implement theIntegrated Risk Management Framework;
ensuring that a supportive learningenvironment exists for risk management,including sensible risk taking and learningfrom experience;
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ensuring that risks are prioritized, and thatappropriate risk management strategiesare in place to respond to identified risks;and
ensuring the capacity to report on theperformance of the risk managementfunction
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Terms of reference of management
committee include business strategies and
policies, M & A proposal, medium and
short term plans, approving policies,
process and practice relating to HR,
Succession planning for senior manager,
to name a few.
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Include:Review of capital structureDistribution policies
Financial policiesAccounting standardsSystems and controls covering accounting
treasuryTaxationForexAnd insurance
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Will include
Review and approving area of research
Org structure
Policies and process for R and D
to name a few
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THANK YOU!