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Institutional EYE

Commentary on Corporate Governance Issues

By Invitation - Board Level Succession Planning (Arun Duggal)

The Companies Act 2013, requires companies appoint independent directors for a five-year starting April 2014. In 2019, in most companies, most directors were reappointed for another five-year term – the maximum permitted under the law. This will create a cliff in 2024 when most IDs, including Committee Chair must retire. They will need to be replaced by new IDs without the benefit of overlap and orderly succession at Board level.

SEBI has mandated that Boards need to identify Skills and Expertise required and available among the Board members. Boards must have a Diversity policy, an Independent woman Director. Directors can serve on maximum of 7 listed company Boards and appointment of Directors over 75 years age will require a special resolution. SEBI has also announced its decision that from April 2020, the Non-Executive Chairman is not related to its MD/CEO

At present, in most companies, CEO and Board level successions tends to be episodical or accidental which exposes companies to a major event risk. In this ‘guest blog’, based on his experience as board chairman and independent director of company boards in India and overseas, Arun Duggal argues for greater focus on succession planning for the CEO, Board Chair, Committee Chair, Independent Directors (ID’s) and other Non-Executive Directors. Besides being essential for good corporate governance, recent regulatory developments make it an urgent priority.

Read the full blog


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