SEBI issues guidance note to companies on board evaluation

Market regulator Securities Exchange Board of India (SEBI) has issued guidance to all the listed companies in the country on evaluation of their respective boards. The timing of the guidance holds significance as the board room battle in India’s biggest conglomerate Tata Group is underway.

The guidance note covers broad provisions on evaluating the performance of the board as a whole, individual directors (including independent directors and the chairperson) and various committees of the board.

The note also specifies responsibilities of various persons/committees for conduct of such evaluation and certain disclosure requirements as a part of the listed entity's corporate governance obligations.

The market watchdog also pointed out that board evaluation as a concept is nascent in the country and it has been bought to its notice by market participants that as the number of listed entities in India is very large, many of them may not have much clarity on the process of board evaluation and hence may need further guidance.

While issuing the guidance note, SEBI has studied the practices of board evaluation prevalent among listed entities in India and best global practices in various jurisdictions and, at the same time, taken into consideration views of all the stakeholders.

The purpose of the note is to educate the listed entities and their board of directors about various aspects involved in the board evaluation process and improve their overall performance as well as corporate governance standards to benefit all stakeholders.