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Governance practices - processes and procedures - Coggle Diagram
Governance practices - processes and procedures
Collective responsibility works best where no individual or group of directors become so powerful as to stifle debate and accountability from the remaining directors
It is necessary for listed companies for there to be transparency in the whole appointment process for directors including recruitment process, selection criteria and disclosure of the reasons the chosen candidate was better than their rivals for the role
Hand in hand with this transparency in the recruimtne tprcoess are effective coproate governance processes and practices embedded within the management and oversight structures to provide appropriate checks and balances
For sole director/shareholder companies, corporate governance may seem unnecessary. While this is true in the sense that directors and shareholders interests are clearly aligned , corporate governance is best practice guidance covering several areas and some of these with suitable adjustment with be of benefit to even the smallest of organisations
Corporate governance can be defined as: the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company's strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The boards actions are subject to laws, regulations and the shareholders in GM
Boards should compromise a balance of executive and independent members to provide the necessary checks and balances and scrutiny of management decisions and strategy.
The balance of executive to independent directors is for each board to consider, however generally speaking the wider the ownership of the company and the larger the organisation the greater the importance of ensuring there are independent voices on the board
The principle on responsibilities of the board recommends the following
Board members should act on a fully informed basis, in good faith, with due diligence and care and in the best interest of the company and the shareholders
Where board decisions may affect different shareholder groups differently, the board should treat all shareholders fairly
The board should apply high ethics standards. It should consider the interests of stakeholders
The board shoud fulfil certain key functions
Reviewing and guiding strategy, plans of action, risk management policies and procedures, annual budgets, business objectives, monitoring corporate performance and overview of capital expenditure, acquisitions and divestments
Monitoring the effectiveness of corporate governance practice
Responsibility for recrutiing, setting salaries and other benefits and monitoring performance of the senior executives, replacing under performing executives and ensuring appropriate succession planning is implemented
Establishing a framework to ensure the interests of executive directors and senior managers are aligned with the longer term interests of the company and its shareholders
Ensuring a transparent board nomination and election process
Monitoring and managing potential conflicts of interests
Maintaining the integrant od accounting and financial systems
Implementing an appropriate process for the timely disclosure and communication of information and in particular price sensitive information
The board should be able to exercise objective independent on corporate affairs
Consideration should be given to ensuring there is an appropriate balance of NEDs to provide independent oversight especially where there is potential for conflicts of interest
Boards should assess whether additional board committees are required to support the board in key areas
Boards must ensure that all directors are not over committed by taking on too many other directorships
Regular board evaluations should be undertaken
To fufil their responsibilities, board members should have access to accurate, relevant and timely information
In circumstances where employee board representation is required, the representative must be supported in their role, providing access to information and training, in order that the representative can effectively represent their constituency and is enabled to make a positive benefit to the board and its decision making processes as a whole
Written corporate governance policies ensure that organisations are in a transparent, ethical manner, promoting good business practices. Corporate governance policies, formulated by the board and management and made available to all stakeholders should address some or all of the following
Election of directors to the board
The proportion of executive, non executive and independent NEDs and diversity policy for board appointments
Disclosure of information on finance and operations
Composition and independence of audit, nomination, remuneration, risk and disclosure board standing committees
Senior executive remuneration below board level
Board meetings and operations
Dividend policy
Matters reserved for the board
Delegated authority