Multiple choice

Board of Central public sector undertakings (CPSU) must comprise at least _____ independent directors after the corporate governance norms made compulsory by the government in 2010.

  1. 10%

  2. 24%

  3. 33%

  4. 50%

  5. 74%
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Central public sector undertakings will now have to ensure that at least 50 per cent of its board members are independent directors.

The Cabinet Committee on Economic Affairs (CCEA) on March 26, 2010 cleared a proposal making it mandatory for public sector undertakings (PSUs) to follow corporate governance norms.

The guidelines clearly state that functional directors on the board of a listed PSU must not exceed 50 per cent of the strength of the board and have no more than two nominee members. Further, a director will not be permitted to be a member in more than 10 committees or act as chairman of more than five committees across all companies in which he is a director.
As per the guidelines, the board will also have to meet once every three months. The corporate governance norms will also have a bearing on the composition and qualification of audit committees, structure of the board and audit committee of the subsidiaries and accounting standards followed by PSUs for financial disclosure. PSUs will have to constitute a qualified and independent audit committee that shall have minimum three directors as members. Two-thirds of the members of audit committee shall be independent directors, according to these norms. To keep the affairs transparent and improve accountability the chairman of the audit committee shall be also be an independent director.

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