Corporate governance regulations and guidelines in many jurisdictions recommend that the positions of the Chair and the CEO should not be occupied by the same individual. A number of jurisdictions also recommend that the Chair of the Board should be an ‘independent’ director. However, this recommendation is not always followed.
In situations, wherein the Chair and the CEO are the same individuals, or where the Chair would not meet an objective assessment of ‘independence’ (such as when she/he is a promoter), it is a good practice to appoint a Lead Independent Director. This Lead Independent Director is usually the senior-most Independent Director and is appointed by the Independent Directors.
The role of a Lead Independent Director is to provide some form of leadership to the Independent Directors as a group, organise and preside over the separate meeting of Independent Directors, interact with the CEO on behalf of the independent directors, and convey any feedback etc that may come from the separate meeting as well as aid in the Board evaluation process if required.
The appointment of Lead Independent Director is not mandatory in India, but it is a step in the right direction for establishing better governance practices, in companies which do not have an Independent Director as Chairperson of the Board.