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Duties and responsibilities of Directors


No.DDPER 35 ARU 2005                                                                                         Department of Disinvestment and State Public Sector Enterprises Reforms, 
                                                                                                                                                             V.V. Main Tower, Bangalore – 1, dated 07-05-2003.


Subject : Duties and responsibilities of Chairmen, Chief Executive and Part-time official and non-official Directors of Public Sector Enterprises (PSE).
Reference :        (1) Chief Secretary’s D.O. No. DPAR (BPE) 5 MAU 80 dated 27-11-1980
                          (2) Official Memorandum No. DPAR (BPE) 2 SBD 81 dated 02 March 1981 and No. even dated 21st April 1981.
                  (3) Chief Secretary’s D.O. No. DPAR (BPE) 7 MAU 81 dated 25th April 1981.
          In the communications cited under reference above, Government had earlier issued a fairly comprehensive set of guidelines on the roles, responsibilities and functions of Chairmen, Chief Executives and Part-time official and non-official Directors of Public Sector Enterprises.  In the wake of Public Sector Reforms and overall need to economise expenditure in PSE’s, it is necessary that the PSE’s are run and managed effectively and efficiently by the Chief Executives.  In this task, they need to be supported by the Board, which is primarly the policy making body of the PSE.
2. Recently, Government reconstituted boards of several PSEs with induction of non-official Chairmen and part-time Directors.  Most of them may not be aware of Government policies and instructions relevant to their roles, powers and functions.  As a result, difficulties have been experienced in functioning of Board of Directors of certain PSEs after appointment of non-official Chairman/Directors.  While reiterating the existing guidelines, instructions on the roles, responsibilities and functions of Chairman, Executive and Part-time official and non-official Directors, it is considered necessary to further emphasise specifically the following:
(i) All the executive powers, functions and responsibilities will be exercised by the Chief Executive of the PSE and the Chairman will only preside over the Board meetings and provide necessary guidance for transacting business of the Company.  Required amendment to the Articles of Association may be carried out to give effect to this policy decision of the Government, if not done already in pursuance of instructions contained in Government letter dated 27th November 1980 cited in Sl.No.1 under reference.
(ii) Normally, Board will deal with policy matters and those proposals requiring approval of Gvoernment and all executive and day to day managerial functions will be carrief on by the Chief Executive and other full time officers of the Company in accordance with the powers delegated to them by the Board.
(iii) Sub Committees of the Board could be set up, only if there is a provision for setting up such committees by the Board under the Articles of the Association of the PSE concerned and not otherwise.  Further, sub-committees, when set up will deal with matters on behalf of the Board only and not with executive functions.
(iv) Part-time official and non-official Directors are expected to attend only board meetings and non involve themselves with any executive functions of PSEs.  Therefore, they will be entitled only for TA & DA, sitting fee etc for attending Boad Meetings in accordance with the Government Orders on the subject and they will not be entitled for any other allowances or facilities such as office accommodation, telephone, cars, stationery, visiting cards etc.
(v) Official tours for the part-time Directors should not normally be allowed.  However, in exceptional cases, prior approval of the Chief Executive will be essential, as already contained in the existing guidelines.
(vi) Normally, only board meetings will be held once a quarter.  However, in exceptional circumstances, if the business so warrants, more meeting may be held subject to a maximum of six in a year and non more than once in two months.  Dates of Board meetings should be decided by the Chairman and the Managing Director after discussion.
(vii) Chief Executives of the PSEs shall be solely responsible for ensuring that Government instructions contained in various Government Orders, Circulars, etc are strictly enforced in the PSEs.  Such insructions may, at best, need to be brought before the Board for adoption.  No Board resolution on matters requiring approval of the Government can be given effect to by the Chief Executive without seeking Government approval irrespective of any circumstances.
(viii) Chief Executives are personally responsible for compliance with Rules and Instructions contained in circulars, guidelines etc issued by Government with regard to roles, functions and responsibilities of Chairmen/Director of PSEs.
(ix) Chief Executives will exercise the right to give his note of dissent to a decision of the Board, if he finds that a decision is either against financial and commercial interests of the company or contrary to rules, regulations, directions etc issued by the Government and if he is not in a position to convince the majority of the Board Members about the same.  In such a case, he shall not give effect to the decision of the Board and shall make a reference to the Government for their orders duly explaining the circumstances.
3. In order to ensure that the above instructions of the Government are followed by all concerned, it is requested that the Administrative Secretaries may take following actions:
(i) To examine Articles of Association of all the PSEs under their control to find out whether any amendment was required to give effect to earlier Government directions and instructions contained in this this and to take necessary stops to carryout such amendments, if required.
(ii) To issue necessary directions under Articles of Association of each of PSEs to the effect that the Chief Executives shall be personally responsible for compliance with Rules and instructions contained in Circulars, Guidelines etc., issued by Government with regard to roles, functions and responsibilities of Chairman/Directors of PSEs.  Directions should also give the discretion of the Chief Execujtive not to implement the decision of the Board, if he finds such a decision either against financial and commercial intrests of the Company or contrary to rules, regulations, directions etc issued by the Government.  In such a case, Chief Executive should record his dissent in the minutes of the meeting and make a reference to the Government for their orders duly explaining the circumstances.
4. It is hoped that these instructions would enable the Chief Executives of PSEs to discharge their functions effectively and efficiently taking due advantage of the expertise and varied experience of Chairmen and Part-time non-official Directors and to extend them full co-operation, courtesy and advice.  Government expects Administrative Secretaries and official part-time directors to play their roles actively with a view to improving the performance of PSEs, especially those which are financially weak.
                 BS Patil
Chief Secretary to Government
All Chief Secretaries of PSEs in the State
Copy to:
1. The Principal Secretary to Governor of Karnataka.
2. The Principal Secretary to Chief Minister of Karnataka.
3. Private Secretary to the Ministers and Ministers of State in Karnataka.
4. All Additional Chief Secretaries/Principal Secretaries to Government of Karnataka
5. All Heads of Departments.

Last Updated: 09-07-2019 11:52 AM Updated By: N R Jaganmatha

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