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CATEGORY 3: Governing Structure and Delegation - Coggle Diagram
CATEGORY 3: Governing Structure and Delegation
Primary Role and Responsibility of the Governing Body
Principle 6.
The
governing body should serve as the focal point
and custodian
of corporate governance
in the organisation
The GB should
put a process
(steps) into place
that should be followed if any of its members ever have to defend themselves
or get professional advice in any legal action or possible legal action
relating to their actions taken in their capacity as directors
. The
steps relate to costs to be paid by the organisation.
key words
Steps when a director is sued for actions in that capacity, and the costs of the defence / professional advice
The GB should
put a process
(steps ) to be followed for when any of its
non-executive members want to meet with management
key words
Steps for the non-executive GB members to follow if they want to meet with management
The GB should
ensure that it has a charter
which
lays out all of its responsibilities
, its
role
, membership requirements and procedures for its operations
key words
GB charter
5.The following must be
disclosed
relating to the
GB's primary role and responsibilities:
b.
whether the GB thinks it has fulfilled its responsibilities as laid out in the GB charter or no
t
a.
number of meetings held
and
attendance records for directors
key words
Disclosure - number of meetings, attendance records and statement on meeting responsibilities
1. The GB
should exercise its leadership
role by:
a.
steering
the organisation and
setting its strategic direction
b.
approving policy
and planning to give effect (make happen) the direction in a. above
c.
overseeing
and
monitoring
implementation and execution by management
d.
ensuring accountabililty
for the organisation's performance by reporting and full disclosure
key words
The GB's corp gov responsibilities:
a.
Set direction and steer
b. Approve policy
c. Oversee management
d. Disclose
NB: These 4 points are basically included as a separate best practice under most of the other principles
GB focal point and custodian of corporate governance
Composition of the Governing Body
Principle7.
The governing body should comprise the appropriate balance of knowledge, skills, competence, diversity, independence for it to discharge its governance responsibilities objectively and effectively.
Nomination, election and appointment to the GB
4. Nominations for re-election must include
candidate performance evaluations
and
meeting attendance
.
Re-election nominations must include performance evaluation and attendance records
Candidates nominated for
non-executive positions
must
confirm
their
availability and capacity to fulfill their responsibilities properly.
Non-exec candidates must confirm that they have enough time to fulfill their responsibilities
Before nominating a candidate, the GB should consider:
a. the
collective knowledge, skills and experience required by the whole GB
(Group boards should avoid duplicating skill sets. Candidates may be highly qualified, but their skills may not be needed if they already exist within the board.)
b. The
diversity of the GB
c. whether the candidate
meets the fit and proper requirements
Individuals must be considered against the whole board in terms of skills and knowledge and diversity targets, and must meet fit and proper requirements
6.
Verify qualifications
and
conduct background investigations
independently before nominating any candidate.
Independent background and qualification checks to be done before nomination
The nomination, election, and appointment procedures must be transparent and clearly defined.
Transparent processes
7. The
AGM notice
for
candidate nominations
must include the following items:
a. brief professional profile
b.
description of current professional
and
other commitments
c. a
statement that the GB supports the nomincation
(per candidate)
AGM notice to include professional profile, commitments and GB support letter per candidate
1. The
approval of GB candidates should be made by the entire GB
, not a sub-committee.
Full GB to approve the nominations to the GB
8.
Terms and conditions
will be
formalized
in a
letter of appointment
upon agreement.
Formal letter of appointment
9. GB should
onboard new members effectively
to
maximize their contribution.
New member induction
10.
Inexperienced GB
members should be
mentored and encouraged to undergo training
Mentorship and training of inexperienced new members
11. GB members
should receive professional development updates
on legal and corporate governance changes and external environment risks.
Regular development updates
- CG, legal, risks and external environment
Independence and conflicts
3. To be an independent non-executive member of the governing board, one
must not have any interests
or
relationships that could cause bias in decision-making for the organization's best interests.
Non-exec GB members who have NO interests/conflicts are considered independent non-exec GB members
Before any meeting, every GB member must
declare any conflicts of interests for the agenda items
and these
should be proactively managed
.
Declaration of conflicts of interest for any agenda items for every meeting held
4. The GB should
consider the following items when assessing the independence of its members.
These should be
considered holistically
(all together in one big picture) and on a substance-over-form basis:
a. The GB member must either
provide funding
or
represent an organization that provides funding
.
b. The GB member
participates in any share-based incentive scheme
offered by the organisation.
c. The individual GB members
possess a significant number of shares in the organization
, which is material to their wealth.
d. Was
employed by the organisation as an executive manager
in the
last 3 years,
or is
related to someone who was
e.
Was the external auditor
or a
key member
of the external audit team
in the last 3 financial years
f. Is a
significant professional advisor to the organisation
(in a different capacity to GB member, eg lawyer/consultant/investor)
g. The GB member
is a GB member of a significant customer or supplier
h. The GB is a
GB member or executive management of a another organisation
which is a related party to the organisation
i. The GB member
is entitled to remuneration
which is
based on contingent fees
Factors that influence the
independence of GB members:
a. provides funding to org
b. share-based incentive scheme participant
c. share in org that are material to member's personal wealth
d. was an executive manager in the last 3 years
e. was external auditor in the last 3 years
f. is professional advisor
g. GB member of supplier/customer
h. GB member of related party
i. contingent remuneration
1. All GB members must
submit an annual declaration of interests
, including financial, economic, and other interests held by them and related parties. Declarations must be
updated whenever significant changes occur
.
Annual declaration of interest
Independent non-executive GB members can serve for 9 years. From 9 years onwards, these members must be annually assessed for objective judgement and independence and conflicts of interest
Annual assessment of objectivity and independence for non-exec GB members serving for longer than 9 years
The disclosure requirements relating to GB composition are:
a. Is the GB happy that its composition reflects the appropriate mix of knowledge, skills, experience, diversity and independence? (statement required to that effect)
b. Targets set for race and gender
c. Each member's categorisation as exec or non-exec
d. Each member's categorisation as independent or not, and a summary of the views on the independence of all independent non-exec members serving for more than 9 years
e. GB members' qualifications and experience
f. GB members' period of service on the GB
g. GB members' ages
h. Other GB and professional positions held by each member
i. Reasons for removal, resignation or retirement of any GB member where relevant
Disclosure:
a. Composition of GB = appropriate mix
b. targets for race and gender
c. Classification as exec/non-exec
d. Classification as independent/not independent
e. qualifications and experience
f. period of service
g. age
h. Other positions
i. reasons for removal, resignation, retirement
Composition of the GB
5. Diversity targets should span all of the considerations in 2a above (i.e. not just on one of them - skills, experience, knowledge etc)
key words
Diversity across the board
4. There
should be a minimum of 2 executive directors
, the
CEO
and one other, to make sure there is more than one point of direct interaction with management for the non-executive directors
key words
Minimum 2 executive directors - CEO and one other
6. GB should
include race
and
gender
in its diversity targets
key words
Race and gender to be included in diversity/composition targets
The GB
should comprise a MAJORITY non-executive members
, and
most of those should be independent
key words
Majority non-executive, mostly independent
The GB should
periodically rotate board members
to
promote fresh perspectives, growth
, and
continuity of knowledge, skills
, and
experience
.
key words
Rotation of GB members
When deciding on the
appropriate numbers of members required
, the GB
must consider
:
a. the
appropriate mix of knowledge, skills
and
experience
, including business, commercial and industry experience, needed to govern the organisation
b. the
appropriate mix of executive
,
non-executive
and
independent non-executive
members it needs
c. how many
members it needs
that are
qualified to sit on its sub-committees
d. the
need for a meeting quorum
e.
regulatory requirements
f.
diversity targets relating to the GB
key words
Factors that effect the composition:
a. skills and experience to govern the organisation
b. mix of exec, non-exec and independent non- exec
c. needs for GB reps on sub-coms
d. what is the quorum going to be
e.regulatory requirements
f. diversity targets
8. The GB should implement a
succession plan
that
identifies, mentors
and
develops future candidates
.
key words
Succession planning
The
GB must take responsibility for its composition
by setting the direction and approving the processes for it to reach the appropriate balance as per the principle
key words
GB to take responsibiltiy for setting direction and approving processes to achieve balance
Chair of the governing body
The CEO cannot chair the GB, and a retired CEO must wait 3 years before being the chair of the GB
CEO cannot chair the GB
The chair's role, responsibilities and duties must be documented in the GB charter
Chair's duties to be included in the GB charter
The chair should have a limit imposed on the number of other outside professional appointments allowed so that there is enough time to devote to chairing the GB effectively
Limit chair's outside positions and work
a second independent, non-exec should be elected to perform the following functions:
a. chair meetings when the elected chairman is absent
b. serve as a sounding board for the chair
c. to act as a link between the chair and other GB members (if necessary)
d. to deal with shareholders' concerns when their normal channels have failed
e. to strengthen independence on the GB if the chair is not an independent non-exec GB member
f. to chair meetings/discussions/decision making where the chair has a conflict
g. to lead the performance appraisal of the chair
Second independent non-exec to assist with duties of chair
GB must ensure that there is a succession plan in place for a new GB chair
Succession planning for chair
independent, non-executive GB member to be elected by the GB
Independent, non-exec
There are rules for what the chair can do on the sub-committees:
a. May sit on audit committee
b. May not chair the remuneration committee but may be a member
c. Should be on nominations committee and may chair it
d. May be on risk goverrnance committee and may chair it
e. May be on social and ethic committee but should not chair it
Limitations on chair's participation in sub-committees of the board:
a. no audit com
b. rem com, no chair
c. nomications com, may chair
d. risk governance com, may chair
e. social and ethics, no chair
Disclosure requirements for the chair:
b. whether there is a lead independent (second) and related roles and responsibilities
a. independence consideration
Disclosure re chair:
Whether independent
Whether there is a second lead
independent
Key Words
Appropriate balance of knowledge, skills, competence, diversity and independence
Long section. The best practicse are broken down into critical areas:
1. Composition of the GB (BP 8)
2. Nomination, election and appointment of members to the GB
3. Independence and conflicts
4. Chair of the GB