CG T1 &2
Topic 1
Constitution (Ltd must have)
Is good governance or good management more important?
People
Management
Employees
Board / Directors
Shareholders
Retail investors
Institutional investors
Memorandum
Articles of associations
Four basic elements of board responsibilities
Performance
Conformance
Strategy formulation (outward looking)
Accountability to shareholders and others (outward looking)
Perspectives to view governance under - not mutually exclusive or all-inclusive (p.30)
Relationship perspective
Stakeholder perspective
Operational perspective
Financial economics perspective
Societal perspective (p.32)
Stakeholder Theory
Corporate Social Responsibility (CSR)
Supervision of executive management (inward looking)
Policy making - turning strategy into something tangible
Topic 2
Types of directors p.92
Independent non-executive director (not significantly connected to the organisation)
Others - nominee / shadow / alternate / governing
Non-executive director (not management but not independent - e.g. retired founder)
Chairman and CEO should be different people
Executive director (works in management)
Shareholder rights p.84
Board represent the interests of shareholders
Increased separation between ownership (shareholders) and management through the increase in investment firms/funds
Rights - received information / attend and vote at shareholder meetings
Shareholders do not have the right to be involved in day to day operations / decisions
Structures p.47
Majority executive directors
Majority non-executive directors
Only executive directors
Only non-executive directives - CGC
Recommended board committees p.179
Remuneration committee
Nominating committee
Audit committee
Other committees may be just as vital dependent on the industry of the organisation, i.e. Health and Safety committee in a high risk industry
Any committee must have clear terms of reference and responsibility which identify the delineation between them and the board, it is important to ensure they do not overstep their authority and the board as a whole is still responsible for all activities of the subcommittees
Associate directors - not actual board member but actually senior employees with the word 'director' in their title, i.e. Director of Operations
Director's legal duties and rights p.96
Duty of trust - to exercise fiduciary responsibilities to shareholders
Duty of care - to exercise reasonable care, diligence and skill
'Business Judgement Rule' p.97 - The courts acceptance that business contain risk and that ill-judged decisions do not automatically equal negligence or fraud and therefore liability on the part of directors.
The 'limited liability' of a company only refers to the shareholders, it does not automatically limit the liability of directors