For greater accountability and effectiveness performance, review of the board and individual director is essential. What is the scope of evaluation of director's performance?

Board evaluation is a key means by which boards can recognize and correct corporate governance problems and add real value to their organizations. A properly conducted board evaluation can contribute significantly to performance improvements on organisational; board and individual member level. Board evaluation typically examines the roles of the Board and the entailing responsibilities, and assesses how effectively these are fulfilled by the Board. Board evaluation contributes significantly to improved performance at three levels - organizational, Board and individual Board member level. It also improves the leadership, teamwork, accountability, decision making, communication and efficiency of the board. A commitment to annual evaluation is powerful change. 1. The Role of the Nominations and Remuneration Committee in performance evaluation of directors Section 178 (2): The Nomination and Remuneration Committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall specify the manner for effective evaluation of performance of Board, its committees and individual directors to be carried out either by the Board or by the Nomination and Remuneration Committee or by an independent external agency and review its implementation and compliance. 2. Independent Directors' role in performance evaluation of Boards, non-independent directors and Chairperson Schedule IV [Part II (2)]: Independent directors are required to bring an objective view in the evaluation of the performance of board and management. Schedule IV (Part VII): The independent directors of the company shall hold at least one meeting in a financial year. without the attendance of non-independent directors and members of management. All the independent directors of the company shall strive to be present at such meeting. The meeting shall: review the performance of non-independent directors and the Board as a whole; review the performance of the Chairperson of the company. taking into account the views of executive directors and non-executive directors; assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. 3. Performance evaluation of Independent Directors Schedule IV Part V: Re appointment The reappointment of the independent directors would be based on their report of performance evaluation. Schedule IV Part VII: Evaluation mechanism The performance of the independent directors would have to be done by the entire Board excluding the director to be evaluated. On the basis of the report of performance evaluation. the continuance or extension of the term of appointment of the independent director would be determined. 4. Inclusion of Performance evaluation in Board' Report According to Rule 8 (4) of the Companies (Accounts) Rules. 2014 Every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors. Provisions under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with respect to Board Evaluation It also requires Boards to conduct an annual performance evaluation and its disclosure in the annual report through the following provisions: 1. Regulation 17(9) states the Key functions of the board of directors which includes: Monitoring and reviewing board of director's evaluation framework. 2. Regulation 17(10) mandates that evaluation of independent directors shall be done by the entire board of directors which shall include- performance of the directors: and fulfilment of the independent criteria as specified in these regulations and their independence from the management. In the above evaluation process, the directors who are subject to evaluation shall not participate. 3. Regulation 19(4) read with Part D of Schedule II It provides that the role of Nomination and Remuneration committee shall, inter-alia, include the following: (1) formulation of the criteria for determining qualifications. positive attributes and independence of a director and recommend to the board of directors a policy relating to, the remuneration of the Directors, key managerial personnel and other employees; (2) formulation of criteria for evaluation of performance of independent directors and the board of directors; (3) devising a policy on diversity of board of directors; (4) identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the board of directors their appointment and removal. (5) whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors; (6) recommend to the board all remuneration, in whatever form, payable to senior management. 4. Disclosure on Performance evaluation criteria for independent directors has to be made under head Nomination and Remuneration Committee in the section on the corporate governance of the annual report.