The dictionary defines the word Emeritus as a person having retired but allowed to retain his title as an honour. In India, Corporate world has been witnessing the elevation of corporate stalwarts as Chairperson Emeritus (hereinafter referred to as CE). Following are some of the companies which have appointed senior Board members/Promoters to the above position:
1. Tata Sons
3. Camlin India
5. Bajaj Finserv
In this article we’ll discuss the various facets of the above appointments.
RATIONALE BEHIND THE CONCEPT
BOARD AND CHAIRMAN EMERITUS
Many of us would like to know whether CE is above the Board? Answer is NO. CE is more like an advisor to the Board or in Hindi there is an apt word for the CE’s role which is Marg–Darshak (मार्ग-दर्शक). CE’s role is neither recognized under the Companies Act, 2013 (the act) nor the act bestows any right, or responsibilities on CE.
IS CE A MEMBER OF THE BOARD?
CE is not a director in the Company. Hence, he is not a member of the Board. Though, he can participate in the meetings of the Board as an Invitee, but Invitee has no right to vote. Also, the Board is not bound by the words of CE.
“Invitee” means a person, other than a Director and Company Secretary, who attends a particular Meeting by invitation. (Secretarial Standard-1)
The attendance register shall contain the following particulars: serial number and date of the Meeting; in case of a Committee Meeting name of the Committee; place of the Meeting; time of the Meeting; names and signatures of the Directors, the Company Secretary and also of persons attending the Meeting by invitation and their mode of presence, if participating through Electronic Mode. (Secretarial Standard-1)
Any Invitee may be allowed to attend a Meeting with the permission of the Chair but his presence should not be counted towards Quorum nor should he be allowed to vote on any item. He may, however, speak at the Meeting with the permission of the Chair. (Guidance note on Board Meeting)
However, CE may exercise considerable influence over the Board and its decision-making given the experience, goodwill and standing of the person appointed as CE. Therefore, we must not forget the concept of “Shadow director” and must recall the following provisions.
2 (59) “officer” includes any director, manager or key managerial personnel or any person in accordance with whose directions or instructions the Board of Directors or anyone or more of the directors is or are accustomed to act;
2 (60) “officer who is in default”
(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;
Moreover, contrary to the last para, it’s not correct to say that CE is completely out of the purview of the Companies Act. Although, the concept of shadow director is chiefly used in negative sense, and whether the board is/was accustomed to acting is a question of fact which may rather not be easy to prove, and which, however, is altogether a different but relevant facet of this discussion to ponder over, in particular in law colleges.
NATURE AND TERMS OF APPOINTMENT
As discussed above, Companies Act doesn’t recognise this concept. However, few sections of the act are relevant regarding the CE’s appointment.
CE is chiefly appointed as an advisor to the Company/Board through an agreement between the CE and the Company. Normally, Board’s consent shall be enough for such appointment. However, members’ consent shall be required in the few cases.
Members’ consent for the CE’s appointment
If the person proposed to be appointed falls under section 2(76), under section 188(1)(f), and first proviso to the section 188(1) of the act then consent of members shall be required to be obtained. (Disclaimer: Possibly there may be some other situation which currently I am not able to perceive)
Agreement, as mentioned above, which is executed shall, inter-alia, provide the rights, duties, responsibilities, period of appointment, remuneration, voluntary/expected code of conduct, if any, and termination etc.