In current times, as the spotlight on boardrooms continues to intensify, the functioning of Boards is seeing some change.It has been noticed that quite a few steps have been, and are being, taken to enhance the diversity of backgrounds, experiences, genders and perspectives in the boardroom. The boards are focussing on new areas of expertise by recruiting candidates from non-traditional sources, especially executives with specialised knowledge in emerging and existing areas. As a result, companies are increasingly appointing directors without experience serving on a public company board or even reporting to a corporate board.
WHAT’S THE BIG DEAL?
Fresh perspective brings fresh challenges. One can recruit the right Director for the Board but integrating them successfully into an existing Board is what results in a high performing and effective board.
It is the duty of the Board to ensure that the Independent Directors who join the Board are given proper training so that they can hasten along the learning curve.
Once a Director gets appointed, the induction Programme is conducted which includes an introduction to the Board members, Key Managerial Personnel and Senior Management personnel.
Familiarisation Programme for Independent Directors has been provided for in Regulation 25(7) of SEBI (LODR) Regulations, 2015 (SEBI Regulations).
FAMILIARISATION PROGRAMME – WHAT’S THAT?
The objective of a familiarisation programme is to acquaint Directors with the latest industry scenario, the socio-economic environment in which it operates, the model of the business and the operational and financial performance of the company.
It is also meant to update the Independent Directors, on a continuous basis, on significant developments so that they can make well-informed decisions.
This programme also envisages updating the directors on the roles, responsibilities, rights and duties under Companies Act, 2013, SEBI Regulations and any other relevant applicable law.
WHAT HAPPENS IN THE PROGRAMME?
The programmes are organised for the Directors. The details of the programme should be disclosed on the company’s website and in the Annual Report as well.
THE CURRENT SCENARIO
Although SEBI has stipulated a familiarisation programme, it has been noticed that most of the companies skip this crucial step or do not take it seriously. In many cases, it has also been noticed the companies have mentioned Board presentations as part, if not the entirety, of the familiarisation programme.
In order to get the Board to function in an effective manner, all the Directors including the new on-boardings should be well-versed with the company’s personnel, business model, Industry functions and operations. Here are a few suggestions that can be taken into consideration :
- The schedule of the programme sessions should be pre-decided on a regular basis and not just on a need-basis during the year.
- The programme should be rich in content.
- The number of such programmes should not be restricted to one.
- Customised training programme for directors by an external consulting firm can also be considered, as a supplementary input.
- It is not necessary to conduct this programme in a classroom model. Offsite training model can also be tried to make it both more interesting and interactive at the same time.
- A third-party evaluation of the quality of the programme could be undertaken.
- A penalty should be imposed on the companies for not arranging proper familiarisation programmes.