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May 01, 2024
Joining a Board as an Independent Director?
PAUSE! Have you done your DUE DILIGENCE?
Before considering a position on a board as an Independent Director, it's essential to undertake a thorough due diligence process.
This comprehensive CHECKLIST is designed to help prospective directors gain a deeper understanding of their potential roles, responsibilities, the company's ethos, operations, governance, and financial health.
1 INITIAL STEPS AND COMPANY OVERVIEW
1. Verify that the company's operations, vision & mission match their values and principles, and they should be familiar with its business model, operating procedures, financial status, and market reputation.
2. Investigate company's public image and ethical standards
3. Review past board papers and, if possible, attend a board meeting as an observer.
4. Conduct independent inquiries especially if noticing frequent changes in directors or company secretaries. Note any red flags.
5. Trust your instincts throughout the recruitment process, ensuring it isn't rushed.
2 CORPORATE GOVERNANCE AND RISK MANAGEMENT
6. Confirm company's compliance with the appointment of Independent Directors
7. Understand the key considerations for Independent Directors
8. Review the composition of the Board of Directors
9. Ensure that company adheres to corporate governance norms and effective governance practices, including ESG compliance.
10. Evaluate company's risk profile, focusing on identifying and managing key risks and improving risk mitigation strategies.
11. Review the establishment of audit committee and the transparency of financial and non-financial disclosures.
12. Assess the adequacy of insurance coverage to mitigate identified risks effectively.
3 FINANCIAL STATEMENTS AND REGULATORY COMPLIANCE
13. Assess the accuracy and completeness of financial statements, ensuring they meet accounting standards and reflect the company's true financial health.
14. Review the auditor's report and management discussions for comprehensive understanding of financial performance and cash flows.
15. Ensure the company adheres to all legal and regulatory requirements, including labour, environmental, and tax laws.
16. Evaluate any legal or regulatory proceedings involving the company, assessing their impact on financial and operational performance.
17. Industry and Market Analysis: Evaluating Sector Trends and Competitor Landscape.
4 RELATED-PARTY TRANSACTIONS AND STAKEHOLDER ENGAGEMENT
18. Review and assess the fairness of related-party transactions, ensuring they align with company policies and comply with laws.
19. Examine the company's stakeholder engagement practices, including policies on employee, customer, and community interaction.
20. Evaluate the company's management practices, focusing on leadership, culture, and talent management for holistic stakeholder engagement.
compiled by:
Board Research & Advisory
Institute of Directors
Bringing a Silent Revolution through the Boardroom
Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'. Currently it is associated with over 30,000 senior executives from Govt, PSU and Private organizations of India and abroad.
Owned by: Institute of Directors, India
Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.
About Publisher
Bringing a Silent Revolution through the Boardroom
Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'. Currently it is associated with over 30,000 senior executives from Govt, PSU and Private organizations of India and abroad.
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