10. Corporate Governance Flashcards
What is the uk corporate governance code?
A code of practice embodying a shareholder led approach to corporate governance
Who does the uk corporate governance code apply to?
All premium listed companies
Smaller and unlisted companies can be more flexible about how they apply the code
Is the uk corporate governance code a legal requirement?
No
However premium listed companies are expected to comply with the main principles
How can companies depart from the uk corporate governance code?
A comply or explain approach is taken to the code
Companies are required to provide an explanation of any non-compliance in their annual report
What are the 5 sections of the uk corporate governance code?
Board leadership and company purpose
Division of responsibilities
Composition, succession and evaluation
Audit, risk and internal control
Remuneration
What is the board made up of?
Chair
Senior independent director
Non executive directors
Who’s included in the board of directors?
Chief executive and executive directors, chair and non executive directors
What is the chair?
Responsible for leadership of the board and ensuring it’s effectiveness in all aspects of its role
What are the rules when appointing a chair?
The chair should be independent on appointment
The chair and chief executive must be different individuals
The chief executive should not go on to be the chair of the same company
What are the duties of the chair?
Setting the boards agenda and ensuring that directors receive accurate, timely and clear information
Promoting a culture of openness and debate and constructive relations between all directors
Ensure effective communication with shareholders
What are non executive directors?
Should constructively challenge and help develop proposals on strategy
What are non executive directors responsibilities?
Reviewing the financial controls and risk management to help to ensure the integrity of financial information
Appoint, remove and set the remuneration of executive directors
Scrutinising management performance and monitoring the reporting of performance
The chair should hold meetings with the NEDs without the executive directors being present
The NEDs should meet without the chair present at least annually to appraise the chairs performance
On resignation NEDs should submit a written statement of any such concerns to the board
What is the nominations committee?
Lead the process for board appointments and make recommendations to the board
Who should be on the nominations committee?
Over 50% of members should be independent NEDs
NEDs should be appointed for specified terms subject to re-election
NEDs serving longer than 6 years should be subjected to a rigorous review
Who can chair the nominations committee?
The chair or an NED
However the chair should not chair the committee when it is dealing with the appointment of their successor
