As per the provisions of Section 149(10) of the Companies Act 2013, an independent director shall hold office for a term of up to 5 years and shall be eligible for reappointment on the passing of a special resolution by the company for a maximum of 2 consecutive terms. Hence, an independent director will not be eligible to be reappointed if he or she has completed 10 years of tenure in compliance with the law. Given the timing of the Act, a large number of companies will have directors rotating out in the next few months, providing an opportunity to re-engineer their boards more effectively.

This article is based on the premise that an entity is desirous of true governance and value addition from the board. Further, this is a simplistic article focused on providing basics and key points with an implementable framework.

In the recent meltdown of the world economy, many once-excellent companies are drowning in their own mistakes. How often does the question arise WHAT WAS THE BOARD DOING? An enormous amount of attention is paid to the activities of the board. I find it incongruous that such big frauds can be the result of minor negligence. Independent directors on the Board, need to discharge their duty of being the anchor that ensures that the company does not falter in direction. The Board's responsibility is towards all its stakeholders (shareholders, lenders, suppliers, employees, the government, the community, etc.) and not just the shareholders.

As the shareholder or senior leader in your organization, you may be tasked with recruiting new board members or identifying potential candidates. The following are the key factors that I believe should be considered when selecting a Board Member:

Culture: "Culture eats strategy for breakfast" is a famous quote from the legendary management consultant Peter Drucker. Each director needs to be in tune with the culture of the entity and also help shape it. Bringing in a heavy hitter with an alien approach will hurt the organization more than benefit it.

Independence: While there were independent directors who were related to the promoter family or directors with some pecuniary link in the earlier era (and many companies I still know today), this principle is fundamental to a company. Independence does not require laws to define it—it requires integrity.

Time Availability: The director should be able to commit the time. With the presence of independent directors, half of the battle for an effective board is won. On the WorldCom Board, there were big names who sat on over 10 Boards of public companies and could not give sufficient time and bandwidth. Evaluating the number of other Boards the candidate is on, along with his other professional commitments, and having a clear discussion on the time commitment expected should be enough to achieve this objective.

Diversity: This is key to the right composition and needs to be looked at from multiple lenses:

• • Skill Set: One may be rich and famous, but is that what the Company needs? The sector and nature of operations drive the right skills needed for Board selection. A professionally well-qualified individual (I believe a Chartered Accountant does the best job here and needs to be on the list) is certainly a key member. The other skill sets one should look forward to depending on the nature of operations could be Human Resources, Information Technology, Marketing, Operations, Consulting, Business Owner, Bureaucrat etc.

• • Age: According to a governance expert, “Enron melted down because most of the independent directors it had were long in the tooth.” The right balance of dynamism and experience is required. Of course, a degree of maturity is needed and hence getting on a 25-year-old onto the Board (unless it's a new-age tech company) may not make sense in a mature industry/ company. In my view, the age between 35 - 65 with a bias towards the younger (under 55 age group) is the right age range to look within.

• • Others: Gender diversity is a key one and requires a specific mention, which is governed by regulation as well. Location may be another aspect to consider, especially if the operations span multiple locations.

Size: There is no right answer to this. There needs to be a balance between value addition and bureaucracy. The increased number of directors does bring in alternate viewpoints and add value, but it also increased the amount of time required for each agenda item and each meeting. I will stick my neck out here and say that in general, 7–8 directors is the ideal size of a Board in order for it to get the diversity of thought it needs while avoiding too much bureaucracy.

Mindset: For the Board to function harmoniously and effectively, the right mindset is required. Board members who are not only concerned with the dotted line formalities but also with qualitative and business aspects are required. The "metal" of a director, while maintaining their constructive approach, is essential to being able to maintain a healthy working relationship with the Executive Directors and do justice to the stakeholders.

Yes, it is far harder to clean a house than to simply tidy up, but the rewards are proportionately greater. An ambitious board-building process, devised and endorsed by directors and management, can turn a good board into a great one. But that transformation happens only when boards define their optimal roles and tasks and marshal the people, agendas, information, and culture to support them. and over the next few months, India Inc. has the opportunity to transform the corporate culture in the country.